French development bank Agence Française de Développement (AFD) on Thursday announced that it would be extending a €120-million (about R1,5-billion) credit facility to commercial banks in South Africa, to be used for small- to medium-sized energy efficiency and renewable energy projects.

To date, the commercial banks involved would be Absa, Nedbank and the Industrial Development Corporation.

AFD Johannesburg regional office investment officer Stéphane Tromilin explained that the facility was being made available to promote investment in the renewable energy and energy efficiency fields, for small or medium sized projects, because the AFD would provide funds for individual projects up to €10-million.

AFD Johannesburg regional representative Christophe Richard further explained that the facility would be put in place by banks, within the financial sector as they knew how to take the risk, and they have business plan to reach these potential clients.

“What we want to do is to accompany them to reach this type of market. To help them in enriching the size of the market, where naturally the bank would not go in energy efficiency, in medium or small sized operations, where the profitability is probably not as natural as it would be for big operations or big programmes, and this is a process in which we want to continue to work, to be active. We are doing that in other emerging countries, we believe that in South Africa it is just the beginning,” added Richard.

It was a 12-year reimbursable credit facility up to €10-million, with no minimum amount specified. It was expected that suitable projects would be identified by early-2010, as the final terms were still under discussion.

“We are taking applications for finance,” quipped a Nedbank representative. He added that this credit facility would assist the bank in trying to track smaller projects, however projects would still have to go through the regular project approvals.

AFD noted that it would also provide some €700 000 in technical assistance to the banks to address capacity building and technology transfer.

“And we also aim to share our carbon footprint tool, in order to accompany all this process of integrating the climate change in considering projects,” highlighted Tromilin.

This aspect of the credit facility meant that stakeholders involved would be asked to calculate the carbon footprint of the project, using what the AFD described as a simple and pragmatic carbon calculator tool, which was free of rights, and available on the AFD website. (http://www.afd.fr/jahia/Jahia/lang/en/home) Updated versions of the tool would continually be made available on the website.

AFD climate change operational department officer Olivier Grandvoinet explained that since 2006, AFD had measured its greenhouse gas emissions and tried to reduce them, and voluntarily compensate for the emissions that it was impossible for the agency to reduce.

In 2007, the bank decided to try and calculate the climate impact of the projects, which it financed. The estimations were kept simple, to enable the calculator tool to be used by every manager at AFD so that the calculator could be implemented upstream.

“The measurement of emissions and emission reductions provide feedback for our investment strategies,” noted Grandvoinet.

More recently, AFD decided it would extend this project to assess the emissions generated through credit line funded projects, or relative emissions reduced during the operation of those projects.

This would mean that the AFD would have dialogue with its local partners, the commercial banks, and would transfer the carbon calculator tool technology as well as the knowledge required to use it.

Banks in China were said to have adopted the tool for assisted projects, as well as for their own needs beyond AFD projects.

“We want to capture the consequence of what we do, and this will enable us to think better about the development projects we put in place,” reiterated Richard.

An issue that was highlighted was that it could be difficult for financial institutions to find out the quantities of materials used for the construction of the project. AFD highlighted that a pragmatic approach was taken, and all effort should be made to find as much detail as possible, however, if this was not possible, calculations could move ahead towards an estimated carbon footprint.

The AFD said that the issues of climate change and development were linked, and should be addressed simultaneously, and because the goal of ensuring universal access to energy was important to the agency, the focus was on renewable energy and energy efficiency projects.

The profile of the AFD’s commitments last year showed that one third of the banks’ funds went towards “low-carbon” projects which sought to address climate change and development. These funds contributed towards fuel switch projects; renewable energy projects such as the Bujagali hydropower dam in Uganda, and a 30-MW wind farm in China; energy efficiency projects such as a public lighting project in Dakar in Senegal; and credit lines such as the one being made available to South African banks.