New Fund Brings Blended Finance Solution to Energy Access in Africa
African Development Bank, Global Environment Facility, Calvert Impact Capital and NDF partner in USD 55 million investment into Off-Grid Energy Access Fund
On December 15, the African Development Bank’s Board approved a US $30-million investment in the Facility for Energy Inclusion Off-Grid Energy Access Fund (“FEI OGEF”). This follows the approval of additional investments of US $10 million from Calvert Impact Capital (CIC), US $8.5 million from the Global Environment Facility (GEF) and €6 million from the Nordic Development Fund (NDF). In addition, the NDF will provide a €0.5-million grant for technical assistance to support deal structuring and capacity development.
FEI OGEF is a US $100-million blended finance debt fund designed to provide loans in local and hard currencies to off-grid energy companies with the dual objectives of scaling up access to clean electricity for off-grid households and crowding in local financial institutions as co-lenders. The Fund directly supports the Bank’s New Deal on Energy for Africa and is part of its “High 5” priority to light up and power the continent, with an aspirational target of connecting 75 million households through off-grid energy access solutions by 2025. Through the use of clean energy instead of fossil fuels to power communities, the Fund is expected to result in the reduction of up to 8 million tonnes of CO2 emissions over its lifetime.
Over 600 million people are estimated to lack access to modern energy in Sub-Saharan Africa.
“FEI OGEF is the first Bank instrument that enables debt financing, including in local currency, to off-grid energy access companies who need growth capital to expand their operations across Africa. The strong collaboration of the Bank, SEFA and NDF in preparing and creating this fund, and the co-investment by the GEF and CIC, demonstrate the power of partnerships for clean energy access in Africa,” said Astrid Manroth, Director, Transformative Energy Partnerships at the African Development Bank.
The combination of these four first investments brings this innovative fund closer to its first close target to be achieved in the first quarter of 2018 and provides a strong signal to the community of interested investors. In particular, the approvals will provides comfort for dedicated private-sector investors to join FEI OGEF.
The Fund is a first mover matching local currency debt instruments with recent innovations in off-grid energy business models to scale up energy access for underserved and rural households. It provides a blended capital structure whereby investments in equity provide comfort and risk cushioning to attract early participation and additional investment by development finance institutions and other commercial investors.
During a recent visit to the Bank headquarters in Abidjan, NDF’s Managing Director Pasi Hellman said, “This initiative highlights the close and constructive working relationship between NDF and the AfDB. We have been in lock step throughout the preparation and development cycle of the Fund. Now we have a fully packaged investment vehicle to bring to market scaling up proven clean off-grid energy solutions to the energy access challenge on the continent.”
The Fund will be managed by Lion’s Head Global Partners operating out of offices in Nairobi, Lagos and London, with an initial focus on East Africa as well as Côte d’Ivoire, Ghana and Nigeria, and looking to build a strong pipeline of transactions throughout the region. The pioneering Fund will unlock and catalyse financial sector and local currency participation in this growing green finance opportunity.
“The GEF is pleased to be a partner in this innovative blended finance facility which is part of GEF’s strategic priority to “crowd-in” private sector investment to help countries meet their environmental and sustainability goals,” said Gustavo Fonseca, Director of Programs at the Global Environment Facility.
“OGEF squarely fits within our investment mandate of leveraging public capital at scale to create systemic change in sectors and geographies that have been overlooked by mainstream capital markets. We are excited to work with the AfDB and the other investors to scale this facility and increase access to clean electricity for off-grid households in Africa,” said Jenn Pryce, President and CEO of Calvert Impact Capital.
The Facility for Energy Inclusion (FEI) is the Bank’s flagship initiative for providing long-term finance to small-scale renewable energy access projects, of which FEI OGEF is one of the financing windows. FEI has been developed with grant support from the Bank-hosted Sustainable Energy Fund for Africa (SEFA).
African Development Bank Group
The African Development Bank Group (AfDB) is Africa’s premier development finance institution. It comprises three distinct entities: the African Development Bank (AfDB), the African Development Fund (ADF) and the Nigeria Trust Fund (NTF). On the ground in 37 African countries with an external office in Japan, the AfDB contributes to the economic development and the social progress of its 54 regional member states. www.afdb.org
Nordic Development Fund (NDF)
The Nordic Development Fund (NDF) is the joint development and climate finance institution of the five Nordic countries of Denmark, Finland, Iceland, Norway, and Sweden. NDF finances and facilitates climate investments in Africa, Asia and Latin America and has committed over EUR 45 million in co-finance to a joint portfolio of operations with the AfDB. NDF is currently partnering with the African Guarantee Fund and the International Trade Center on a series of green finance conferences around Africa. The next in the series is planned for Abidjan in March 2018. www.ndf.fi/
Global Environment Facility (GEF)
The Global Environment Facility (GEF) is a multilateral donor trust fund established in 1991 to finance actions which address critical threats to the global environment. Since then, the GEF has provided over US $14.5 billion in grants and mobilized an excess of US $75.4 billion in additional co-financing for more than 4,000 projects in 167 countries. The GEF is a unique partnership of 18 agencies – including multilateral development banks (MDBs), United Nations agencies, national entities and international NGOs – working with countries to address challenging environmental issues. www.thegef.org
Launched in 2012, SEFA is a US $95-million multi-donor facility funded by the governments of Denmark, the United Kingdom, the United States and Italy. It supports the sustainable energy agenda in Africa through grants to facilitate the preparation of medium-scale renewable energy generation and energy efficiency projects; equity investments to bridge the financing gap for small- and medium-scale renewable energy generation projects; and support to the public sector to improve the enabling environment for private investments in sustainable energy. SEFA is hosted by the Renewable Energy Department of the AfDB.
Calvert Impact Capital
Calvert Impact Capital invests to create a more equitable and sustainable world. Through our products and services, we raise capital from individual and institutional investors to finance intermediaries and funds that are investing in communities left out of traditional capital markets. During our 22-year history, we have mobilized nearly $2 billion of investor capital. https://www.calvertimpactcapital.org/