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Using Notarial Bonds as a Form of Security in the Financing of Renewable Energy Projects

Reading Time 9 minute read Reading Level Easy


The current energy crisis, the inaccessibility of electricity to rural and remote areas, and the issue of environmental degradation from an over-dependence on coal have led to a substantial increase in the share of renewable energy in the national energy mix over the last few years in South Africa.

Unsurprisingly, numerous renewable energy projects have been completed, are still being constructed and are planned to be constructed in terms of the different bid windows of the South African Government’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

On the premise that a renewable energy project is financed through a project finance structure, the registration of a notarial bond plays a vital role as a form of security in financing renewable energy projects. A notarial bond secures the primary movable assets of the project (for example, the wind turbine generators and solar panels) that are responsible for generating the cash flows required to repay the lenders’ loans.

The registration of notarial bonds is required in addition to the registration of a mortgage bond over the land owned by the project company, or over the long-term registered notarial lease entered into between the project company and the landowner, as well as any other security that may be required by the lenders.

In this article, we will briefly give some context to the financing of renewable projects and discuss the –

  • nature of a notarial bond;
  • two most common notarial bonds used in the financing of renewable energy projects; and
  • duties of a notary when tasked with drafting and registering a notarial bond.

Some context to the financing of a renewable project

The Request for Proposal for the procurement of new generation capacity of 2 600 megawatts under the REIPPPP bid window 5 was recently released which aims to procure the development of 1 600 megawatts of energy from wind energy and 1 000 megawatts from solar photovoltaic power plants was recently released. The development, operation and maintenance of renewable energy projects require high capital investment which is usually financed through a project finance structure.

The main reason for this is because renewable energy projects entail the long-term financing (usually 25 years) of the project infrastructure based on projected cash flows of the project rather than the balance sheets of its sponsors. Usually, a renewable energy project financing structure involves a number of equity investors, known as “sponsors”, and a syndicate of banks or other lending institutions that provide loans to the operation.

The financing is typically secured by all of the project assets (by way of mortgage and notarial bonds) including the revenue-producing contracts. The lenders are also given a lien on all of these assets and are able to assume control of a project if the project company has difficulties complying with the loan terms.

The nature of a notarial bond

A notarial bond is a bond attested by a notary public, hypothecating a specific movable asset (or specific assets), or all the movable assets of a debtor generally, and is registered in the deeds registry by the registrar of deeds[1]. In simple terms, it is a form of security where a debtor mortgages a movable asset (a thing is considered to be movable if it can be moved from one place to another without being damaged and without losing its identity[2]) in favour of a creditor.

We set out below an array of examples of assets regarded as “movable assets” in renewable energy projects. There are different types of notarial bonds, however, this article focuses on General Notarial Bonds and Special Notarial Bonds which find common application in the project finance space.

General Notarial Bonds (GNBs)

A GNB hypothecates as security all the movable property of the mortgagor generally. It applies to all movable property in the possession of a debtor when the bond is passed and may include movable assets acquired after the passing of the GNB[3].

In terms of South African common law, the creditor under a GNB does not have any real rights of security in respect of the movable property encumbered by the GNB unless such movable property is in their possession[4]. This means that if the debtor does not voluntarily transfer the movable property to the creditor, the creditor will have to obtain a court order to perfect their security.

In a typical renewable energy project, lenders will advance the finance before the development and construction of the project commences, to enable the project company to finance the development and construction of the project. The timing of this step in the project finance process is usually referred to as “Financial Close”.

As security for the finance, the lenders will in addition to any other security, require the registration of a GNB over all the project company’s movable assets generally, due to the fact that nothing would have been constructed at the start of the project and this makes specifying and identifying movable property in the notarial bond impossible.

Special Notarial Bonds (SNBs)

An SNB hypothecates as security specific movable property of a mortgagor as specified and identified in the SNB. Section 1 of the Security by Means of Movable Property Act 57 of 1993 (SMMP Act) provides as follows-

If a notarial bond hypothecating corporeal movable property specified and described in the bond in a manner which renders it readily recognisable, is registered after commencement of this Act in accordance with the Deeds Registries Act 47 of 1937, such property shall-

a) subject to any encumbrance resting upon it on the date of registration of the bond; and

b) notwithstanding the fact that it has not been delivered to the mortgagee, be deemed to have been pledged to the mortgagee as effectually as if it had expressly been pledged and delivered to the mortgagee.” [Own emphasis]

This means that the creditor is deemed to be in possession of the property placing his legal position on an equal footing with that of a pledgee[5]. In contrast to a GNB, the creditor acquires a real right of security in the movable property upon registration of the SNB in the deeds registry.

If the debtor fails to pay the debt, the creditor could have the mortgaged property sold and could receive payment of the debt out of the proceeds in preference to all other creditors[6]. As a result of the security afforded to lenders through the registration of an SNB, logic dictates that lenders would prefer to register SNBs, as opposed to GNBs, to best protect their interests.

However, in a renewable energy project scenario, the primary movable assets comprising the renewable energy project (for example, the wind turbine generators and solar panels) will only be capable of being specifically described in a manner that renders it readily recognisable (as required under the SMMP Act), once the development and construction of the project is completed.

Therefore, to secure the lenders’ interest for the duration of the development and construction period, a GNB is registered at Financial Close. At the completion of the project (which is usually referred to as “Commercial Operation”), the lenders usually require that an SNB be registered over the specifically described movables comprising the project to protect their interests and secure real rights in the project assets. What follows below, are specific examples of what one would usually secure under an SNB.

What serves as security under a notarial bond in a renewable energy project?

Generally, security serving under a notarial bond may be corporeal movable things such as furniture, the goods of a business, animals or incorporeal things such as a short term lease of immovable property, an unregistered lease or a liquor license.

In the context of renewable energy projects, when registering a GNB, the drafting is fairly simple, as the GNB secures all of the project company’s movable assets generally, and there is no requirement to specify the movable assets in the GNB.

In contrast, when registering the SNB, it becomes a bit more complex given the size of the projects, the numerous assets falling under the scope of the project and the statutory requirements embedded in the SMMP Act to describe each asset with sufficient specificity. By way of example, a wind farm project would usually consist of inter alia -

  • a substation;
  • wind turbine generators;
  • pad-mounted transformer kiosks;
  • meteorological masts; and
  • transmission cables,

which all have sub-components. For example:

  • A single substation could inter alia consist of numerous circuit breakers, current transformers, voltage transformers, disconnectors, surge arrestors, power transformers, switchgear, panels, distribution boards and generators; and
  • A wind turbine generator could inter alia consist of blades, tower units, nacelles and a generator.

The size and complexity of these projects have meant that SNBs need to contain detailed descriptions of almost every component in order to comply with the statutory provisions of the SMMP Act. Therefore each asset must be described with reference to the asset description, manufacturer details, serial numbers, GPS co-ordinates for the location of the asset and photos of the asset.

Normally, the notary responsible for the drafting of the SNB will conduct a site visit to verify the asset descriptions and to ensure that they are accurately and sufficiently described in the SNB.

Duties of a Notary

As alluded to before, a notarial bond, whether being a GNB or SNB, must be executed by a notary and registered in the relevant deeds registry. The notary attending to the registration of the GNB and the SNB must be careful when drafting the respective notarial bonds.

If for example, the assets are generally bonded, and provision is not made for the attachment of the movable assets, then the court will not grant an order in favour of the creditor. If for example, the movable assets secured by a SNB are not sufficiently described in a manner that complies with SMMP Act, then the SNB will not be regarded as real security and the lender will not be afforded the protection afforded on insolvency.   

It should further be noted that a notary is instrumental in transmitting contractual actions by means of legally enforceable notarial deeds executed before him/her, to third parties, with the latter being able to rely on the accuracy of the information[7].

This means that every statement in the notarial bond is presumed to be correct and should it, in fact, be found that it was false, the notary responsible for the drafting of the notarial bond can be held liable in a court of law.


When lenders finance renewable energy projects, monies are advanced and whilst the idea of being part of innovating South Africa’s energy space is attractive, no lender will advance monies in a project finance transaction without having sufficient security over the assets that are the primary drivers of the cash flows required to repay their loans.

Registering notarial bonds enables the project company to unlock the full value of the renewable energy project assets and provide the lenders with the necessary comfort for their investment.



[1] Section 102 of the Deeds Registries Act 47 of 1937.

[2] Van Leeuwen 2 1 6, Voet 1 8 11 et seq, Huber 2 1 5, Van der Keessel Prael ad Gr 2 1 10.

[3] Jansen M, More legal security regarding security by means of general notarial bonds, South African Mercantile Law Journal, 15(3), (2003), 486-iv.

[4] Van der Merwe FE, Notarial Practice, Butterworths, Durban, 2001, 165.

[5] Van der Merwe at 166.

[6] A West, The Practitioners Guide to Conveyancing and Notarial Practice, Lexis Nexis, (2018), 271.

[7] Van der Merwe at 12.



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