We believe that there is a benefit in investing earlier than the commercial operation date in that Hulisani realises a higher yield as a result of our investment in these projects at an early stage. This ensures that Hulisani receives a higher yield whilst only contributing equity once all the contracts have been signed. We believe that investing in both primary and secondary projects is complementary and that a combination of primary and secondary transactions in our portfolio will ensure a sufficiently diversified basket of assets with an attractive yield.
The projects we invest in typically have a guarantee mechanism behind them provided by the off-taker of the power to ensure consistent, predictable and reliable inflation-linked returns. In the case of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), and other South African IPP programmes, there is ultimately a sovereign guarantee in place that ensures payment.
It is worth reiterating that our PPA returns are linked to the Consumer Price Index (CPI), meaning that returns are automatically adjusted by the prevailing CPI, thus ensuring that real returns are realised throughout the term of the PPA as the returns are not eroded by inflation.
The assets held by Hulisani provide opportunities for potential shareholders to invest in an asset class that gives sustainable, long-term, consistent, predictable and reliable inflation-linked returns. We participate in equity investments as well as other instruments that allow us to have exposure to a similar return profile from the project.
This is a strategy that has borne fruit as it has positioned Hulisani well and provides flexibility when looking at structuring to realise the most optimal returns. Through our hands-on involvement in each of our assets, we carefully track trends in the energy sector and pre-empt market demand by ensuring that we are well placed to take up opportunities as and when they arise