Investments accumulated to catalyse off-grid energy development

26th January 2018 By: Donna Slater - Creamer Media Staff Writer and Photographer

Multilateral development bank the African Development Bank’s (AfDB’s) board approved a $30-million investment in the Facility for Energy Inclusion Off- Grid Energy Access Fund (FEI OGEF) last month.

The FEI OGEF is a first-mover- matching-local-currency debt instrument 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.

This follows the approval of additional investments of $10-million from nonprofit investment firm Calvert Impact Capital (CIC), $8.5-million from partnership financial mechanism the Global Environment Facility (GEF) and €6-million from joint development finance institution the Nordic Development Fund (NDF).

In addition, the NDF will provide a €500 000 grant for technical assistance to support deal structuring and capacity development.

The FEI OGEF is a $100-million blended finance debt fund designed to provide loans in local and hard currencies for 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 AfDB’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.

It is estimated that more than 600-million people lack access to modern energy in sub-Saharan Africa. Using clean energy instead of fossil fuels to power communities is expected to result in the FEI OGEF eliminating up to eight-million tons of carbon dioxide emissions over the fund’s lifetime.

AfDB transformative energy partnerships director Astrid Manroth says the FEI OGEF is the first AfDB instrument that allows debt financing, including debt financing in local currency, for off-grid energy access companies that need growth capital to expand their operations across Africa. “The strong collaboration of the AfDB, the Small Enterprise Finance Agency and the NDF in preparing and creating this fund, and the coinvestment by the GEF and CIC, demonstrate the power of partnerships for clean energy access in Africa.”

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 this year.

During a visit last year to the AfDB headquarters in Abidjan, Côte d’Ivoire, NDF MD Pasi Hellman said the FEI OGEF initiative highlighted the close and constructive working relationship between the NDF and the AfDB. “We have been in lockstep 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 specialised merchant bank Lion’s Head Global Partners, operating out of offices in Nairobi, Kenya; Lagos, Nigeria; and London, UK. The initial focus will be on East Africa as well as Côte d’Ivoire, Ghana and Nigeria, with a view to building a strong pipeline of transactions throughout the region.