‘New energy plan could spark growth for JSE and SA economy’

President Cyril Ramaphosa’s energy plan could be a catalyst for economic growth, requiring capital that would  lay the foundation for more listings and increase the potential for new bonds and private placements by companies in the power sector, says JSE CEO Leila Fourie.

There could be “many quick wins” if the plan was rolled out effectively, she said this week after the release of results for the six months ended June.

This could “build confidence, create momentum and provide an opportunity for growth” for Africa’s largest bourse and the broader economy.

Elements of the president’s plan to increase grid capacity include scrapping the threshold for private power-generation projects that feed into the grid and doubling the size of bid window 6 of the state’s renewable energy independent power-producer procurement plan to 5,200MW.

Eskom is being restructured into separate  generation,  transmission and distribution companies.

Ramaphosa said Eskom had already established an independent transmission company and was on track to separate its generation and distribution businesses by the end of 2022.

Fourie said the JSE had a key role in providing support to enable financial capital formation for independent power producers (IPPs) and offered instruments to enable companies to raise funds for renewable energy projects. 

The JSE’s sustainability segment, where issuers can list social, sustainability and green bonds, was created through the expansion of its original green bond segment in July 2020.

Green bonds relate to energy, water and waste, while social bonds could be related to housing, schooling or health. Sustainability bonds are a combination of green and social bonds, aimed at raising funds for climate, social and environmental projects.

Fourie said there was an opportunity for parts of Eskom, such as the transmission company, to be listed on the exchange.

It could be a “genuine opportunity not only to improve governance and transparency of financials, which will then be open to the market”, but also to “enable the financial economy to support the rebuilding of important infrastructure”.

Independent power producers keen to raise capital through listings could also look to float on the main board, said Fourie.

There is an opportunity for parts of Eskom, such as the transmission company, to be listed on the exchange

—  JSE CEO Leila Fourie

She said three of the 11 issuances on the exchange’s private placement market, launched in the first quarter to allow private companies to access capital, were sustainability-related.

The market was growing strongly, with the JSE reporting in its interim  results that so far this year new issuances on the platform had attracted R10bn in new investor capital.

The JSE has also been investigating the introduction of a carbon credits trading market.

Fourie said this was in “in the analysis stage, looking at market sizing and general proposals” and the bourse was discussing the idea with other international players, including Singapore and Hong Kong.

“We are aiming to formulate a proposal towards the second half of the year and credit futures could bring with them new products to the market. But this of course is subject to approval from National Treasury.”  

Makwe Masilela, head of Makwe Fund Managers, said there was definitely a possibility of more listings and an increasing take-up of green and other bonds by renewable energy players.  

“The reason why I believe the possibility of this happening is strong is we have already seen companies issuing green bonds — that was even before the introduction of the new energy plan.

“With the new energy plan and restrictions being far fewer, more players will be able to participate, and more money will need to be raised.”  

Companies could issue bonds for large-scale solar projects or for possible expansion into other markets apart from SA.

Casparus Treurnicht, portfolio manager and research analyst at Gryphon Asset Management, said there could be limited interest in listings by IPPs in renewable energy, because the private equity space was “probably more primed for this kind of environment”.  

But he believed there could be more activity and interest in the bonds market of the JSE, with significant potential for more players using it to raise funds.

This week the JSE reported a strong set of results, with net profit surging 28% to R447m, and Fourie said “every business line reported increased revenue”. Group revenue was 11% higher at R1.38bn. 

Traditional platforms, such as its equity market, saw revenue rise 9%, while moves into different product lines such as information and data services were also paying off, along with the new private placement business.

Its JSE Investor Services (JIS) business has grown its market share from 20% at acquisition in 2020 to 27% and added 14 new clients.

 JIS, a wholly owned subsidiary, provides registry management, meeting and investor communication services for listed and unlisted companies, and safe custody services to investors and issuers.

It also offers share ownership analyses, market intelligence, investor communication and shareholder management services.

JSE Trade Explorer, which “provides equity market trade analytics”, is another newly launched product.  

Asked about the JSE's role in dealing with errant companies, Fourie said the bourse takes its monitoring role seriously, especially when companies flout listings requirements.

The JSE has been criticised by some analysts for seemingly lacking the teeth to deal with delinquent companies, especially in view of corporate scandals involving companies such as Tongaat Hulett and Steinhoff.

Fourie said this was “simply not true”.

“Any divergence from listings requirements is treated seriously and thoroughly investigated by the JSE, but those investigations are not in the public domain. We have to follow due process and respect the letter of the law and sometimes that means a delay in the outcome.

“So what might appear to outside participants as the JSE being unresponsive is simply not true. It’s a case of the JSE doing its job but not in the public domain. I can assure that every single breach of listings requirements, and many of them are proactively identified through our monitoring, is investigated thoroughly. I wouldn’t take the timing of those outcomes as indications of our effectiveness or not.”