Recently there has been a proliferation of financiers looking into the African energy market, as well as an increase in the overall portfolio size of the funds available to project promoters. However, solar project promoters in Africa may be underestimating the amount of funds accessible to African renewable projects. The financing options are also wide, including equity, debt mezzanine and grants. So the question has now become: ‘In order to secure the needed finance in the midst of abundance what should promoters do?’
This financing database along with other similar initiatives underscores the fact that solar project promoters can now raise funds from traditional financial institutions such as local and national banks and, more importantly, from other modern sources of capital such as private equities and Development Finance Institutions (DFIs) such as the African Development Bank (AfDB), the World Bank and the US Power Africa Initiative. In addition, many developed countries now have funds dedicated to African renewable energy projects which are deployed using different instruments.
One such example is the Sustainable Energy Fund for Africa (SEFA). Launched in 2012, this is a USD 95 million multi-donor facility administered by the African Development Bank, funded by the governments of Denmark, the United Kingdom, the United States and Italy.
SEFA seeks to increase the pool of “bankable” investments in small- and medium-scale renewable energy projects in Africa through grants for project development and equity investment to bridge the financing gap.
However, this necessary abundance of funding is not by itself a sufficient condition for renewable energy to proliferate in Africa. To use the words of Jamie Fergusson, Chief Investment Officer of the International Finance Corporation (IFC): “There is abundant liquidity for solar in Africa; liquidity is not the issue. The issue is bankable scalable projects” (watch full talk).
The apparent delay in securing finance (despite available funds) could be attributed to many factors including poorly bankable projects and poor project conceptualization.
According to Joao Duarte Cunha, SEFA Coordinator, “many African project developers lack the technical know-how and risk capital to prepare a project that could meet the stringent criteria of commercial financiers”.
African energy entrepreneurs should then understand the best approaches and procedures for securing capital, and familiarity with platforms such as the RECP’s Database could prove essential to successfully securing finance.
Source: Solarplaza
