Africa-EU Renewable Energy Cooperation Programme (RECP) A European - - PowerPoint PPT Presentation

Africa-EU Renewable Energy Cooperation Programme (RECP)

A European Platform for Private Sector Investments in Africa’s RE Markets

Alexander Huppertz

Background I: Demand and Market Volume in Africa

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New Investment in Clean energy in Sub-Saharan Africa 2004-15 ($bn); Source: Bloomberg New Energy Finance

• SSA: 13% of the world’s population, but only 4% of its energy demand
• Since 2000 energy use has risen by 45%
• Only 290 out of 915 million people have access to electricity
• 80% rely on traditional use of solid biomass,

mainly fuelwood, for cooking

• “Modern” renewables account for less than

2% of the primary energy mix

• Annual (private!) investment in the range of

double-digit billion US$ is required per year to meet Africa’s energy needs

• Enormous challenge = huge opportunities!

$0.0bn$0.2bn$0.2bn $0.5bn $1.0bn $0.3bn $2.0bn $1.4bn $6.5bn $6.8bn $3.1bn $5.2bn 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Other clean energy Geothermal Small hydro Wind Solar

Background II: Key Market Segments for RE in Africa

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Large / Meso- scale on-grid (IPP)

Ticket size: XX-XXX US$m (meso: X-XX US$) Key regulations: PPA (FiT)

Small on-grid (captive power)

Ticket size: 0.X-X US$m (bundled X-XX US$m) Key regulations: FiT / Net-Metering

Off-Grid (Mini-Grids)

Ticket size: 0.X-X US$m (bundled X-XX US$m) Key regulations: Licences, Tariffs, Grid-connection standards

Off-Grid (Standalone Systems)

Ticket size: X-XX US$m (“bundled”) Key regulations: Standards, Import Tax / Duties

What is the RECP?

• The RECP is a African-European platform for promoting renewable energy market

development and investment in Africa

• Funded by the European Commission, the Netherlands, Germany, Austria and Finland

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How can the RECP provide support?

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Well structured and accessible Market Information Identifying Project Opportunities in Partner Countries Match-Making Events in Africa and Europe Project preparation support and access to financial support

Successful Access to Financing

+ complementary policy advisory + support to skills development and innovation

How can the RECP provide support?

Access to market information

• Web-based market briefings introducing the political and economic situation, the electricity

sector and the RE potential

• Market Studies with “how-to”-information, providing an in-depth analysis of a certain market

segment (e.g. Captive-Power/Self-Consumption in Nigeria)

• Project scouting: through in-country partners, and consultants
• Information events: workshops that introduce certain markets (or segments) presentations or

panels; organized through partners

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How can the RECP provide support?

Access to potential business partners and project opportunities

• RECP matchmaking events help you identify your next project/partner:
• Meet technology suppliers, project developers, service providers from Europe
• Meet potential clients and business partners from African markets
• Meet potential financiers
• More than 15 events in preparation, both in Africa and Europe, for 2016 and 2017
• Events are organized standalone or attached to other events, through partners

(African and European industry associations or equivalent), with structured match- making sessions

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How can the RECP provide support?

Information on Financing Opportunities

• RECP’s finance database helps you identify sources of funding:
• Information on more than 50 individual sources of funding; currently

gathering data on funds

• Initial risk-mitigation instruments

included, to be expanded

• Inclusion of local banks is planned

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How can the RECP provide support?

Advisory to Project Developers: the “Finance Catalyst”

• Provides advisory support to project developers on project development,

structuring and access to finance (“bankability TA”)

• Cooperation (“two-way-street”) with existing financing instruments (ElectriFI,

REPP, SEFA, and many others): “feeding into” as well as “upstream referral”

• Delivered through a team of highly experienced professionals
• Standardized and fair access procedure

through an “intake” on the RECP website

• Time “budget” of up to 100 hours per project

(deviations possible)

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Initial Results – Access to Finance

Finance Catalyst is supporting projects in accessing finance since August 2016

• First 3-months of operation resulted already in 94 applications!
• Clear need in the market for this type of early-stage project preparation support!

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PV 34 SHS 12 Biomass 10 Biogas 8 Small Hydro 8 Other 22

Applications by Technology 10 20 30 40 50 60

IPP Mini-Grids SHS Other

Applications by Market Segment

Initial Results – Access to Finance II

Strong interface with ElectriFi established

• Very close collaboration on working and management level

between ElectriFi and RECP Finance Catalyst.

• Mutual referral system in place.
• Close exchange facilitates targeted advisory from Finance

Catalyst Team towards „feeding“ into ElectriFi.

• Additional interfaces established with:

 RECP services are bridging the gap between projects and finance!

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 EEP  REPP  SEFA  FMO  DEG  Energy Access Ventures 

• Et. Al.

Investments that bridge the gap between grant and commercial funding

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Many impactful initiatives that have the potential to become financial sustainable do not come off the ground as they are:

• too big for some, too small for others; or
• too risky a combination of factors
• unproven techniques
• parties with little track record
• collateral not available
• wrong funding mix (not enough equity)
• flexible financing required, (no straight

repayments) etc. ElectriFI aims to provide flexible answers, yet aligned with the developers/investors.

The gap between grant funding and commercial financing

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ElectriFI seeks to support electrification investments that will

• lead to new and improved connections, with a
• focus on rural, underserved areas. In addition,
• ElectriFI encourages the adoption of renewable energy,
• for ventures that will be or aim to be financially sustainable,
• With potential to scale.

ElectriFI offers flexible funding and repayable TA to high risk, early stage ventures

• TA support (i) to financially structure the investment, (ii) to finance early stages of

investment, (iii) for E, S, G topics

• Flexible financing (no grants, but), development funding, mezz/sub debt, equity,

guarantees, local currency, with returns aligned with sponsor returns,

• From start up financing to early stage follow-on financing (until others take over)
• Target range for ElectriFI contribution EUR 1-4 mln (min EUR 500k – max EUR 10mln)

How ElectriFI seeks to bridge the gap

Potential Types of Financing (always additional)

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Typical Corporate Typical SPV (project finance)

• Quasi-equity

̶ 7 year deeply subordinated loan, bullet repayment, deferrable interest, profit sharing mechanism, limited ability to accelerate, local currency option

• Working capital facility

̶ 3 year senior amortising loan with limited security requirements and local currency option

• Development Financing

̶ 3 year high yield loan with capitalised interest, early-out option, cash exit at Financial Close, or conversion to shareholder loan equivalent, i.e. complete alignment with sponsors and ultimate exit post COD

• Broader scope of activities
• On-balance sheet
• Revenues subject to market forces

(less predictable)

• Off-balance sheet vehicle
• Regulated environment
• Numerous stakeholders
• Contractual apportioned risk
• Predictable cash flows

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Analysis by business model

39.3% 19.7% 14.1% 12.8% IPP Utility SHS CPP Other PPP

0% 20% 40% 60% 80% 100% Southern Africa East Africa Central Africa West Africa North Africa Americas Asia

IPP Utility SHS CPP Other

Category Description Abbreviation Power Public Procurement and/or Management PPP Power IPP (State or Municipal Off-take) IPP Power Captive Power (Private Off-take) CPP Power Mobile Power Units MPU Power Telecom Towers with Surplus Sales TTSS Utility Mini- / Micro-grid Utility Equipment Distribution of Solar Home Systems SHS Equipment Design and Manufacturing Manufacturing Services Distribution of Bottled Gas Services Indirect Financial Intermediaries Indirect

Business Model by Region Applications by Business Model

How can the services and products be accessed?

Countries, Partners and Access

• The RECP operates „in depth“ in six African countries

(Nigeria, Rwanda, Uganda; Senegal, Zambia and Mozambique in preparation)

• We cooperate with and implement through a network
• f partners, both in-country as well as global or

European industry associations

• Information and support services are accessible

through www.africa-eu-renewables.org

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Thank you for your attention! Suggestions & Feedback always welcome!

www.africa-eu-renewables.org Contact: Alexander Huppertz, alexander.huppertz@euei-pdf.org

• Flexible European Technical Assistance

instrument promoting sustainable energy for equitable development

• Services: donor coordination support, political

dialogue, policy advice, private sector promotion

• Studies and Resources, e.g.

– Mini-Grid Policy Toolkit – Building Energy Access Markets – Low Cost Grid Electrification – Etc. www.euei-pdf.org

Bonn 12 May 2017 page 19

EU Energy Initiative – Partnership Dialogue Facility (EUEI PDF)

12.05.2017 Seite 20

• Goal: support coordination between donors,

access to information for all stakeholders

• Objective: provide analytical framework for
• rientation, map all relevant initiatives in Africa
• Methodology: public sources, expert consultation,

validation with initiatives directly

• Findings: 58 ongoing initiatives,

~5bn USD in 2013

• Available at: http://www.euei-pdf.org

AEEP Mapping of Initiatives