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 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 $6.8bn $6.5bn “Modern” renewables account for less than 2% of the primary energy mix $5.2bn Annual (private!) investment in the range of Other clean energy double-digit billion US$ is required per year to meet Africa’s energy needs Geothermal $3.1bn Small hydro Enormous challenge = huge opportunities! $2.0bn Wind $1.4bn Solar $1.0bn $0.5bn $0.0bn$0.2bn$0.2bn $0.3bn 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 New Investment in Clean energy in Sub-Saharan Africa 2004-15 ($bn); Source: Bloomberg New Energy Finance 2
Background II: Key Market Segments for RE in Africa Large / Meso- scale on-grid (IPP) Off-Grid (Mini-Grids) Ticket size : XX-XXX US$m (meso: X-XX US$) Ticket size : 0.X-X US$m (bundled X-XX US$m) Key regulations : PPA (FiT) Key regulations : Licences, Tariffs, Grid-connection standards Off-Grid (Standalone Systems) Small on-grid (captive power) X-XX US$m (“bundled”) Ticket size : Ticket size : 0.X-X US$m (bundled X-XX US$m) Key regulations : Standards, Import Tax / Duties Key regulations : FiT / Net-Metering 3 3
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 4
How can the RECP provide support? Match-Making Events in Africa and Europe Successful Access to Financing Well structured and accessible Market Information Project preparation support and access to financial support Identifying Project Opportunities in Partner Countries + complementary policy advisory + support to skills development and innovation 5
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 6
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 7
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 8
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) 9
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! Applications by Market Segment Applications by Technology 60 Other PV 22 34 50 40 Small Hydro 30 8 20 Biogas 10 8 Biomass 0 SHS 10 12 IPP Mini-Grids SHS Other Clear need in the market for this type of early-stage project preparation support! 10
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: EEP DEG REPP Energy Access Ventures SEFA Et. Al. FMO RECP services are bridging the gap between projects and finance! 11
Investments that bridge the gap between grant and commercial funding
The gap between grant funding and commercial financing 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 o unproven techniques o parties with little track record o collateral not available o wrong funding mix (not enough equity) o flexible financing required, (no straight repayments) etc. ElectriFI aims to provide flexible answers, yet aligned with the developers/investors. 13
How ElectriFI seeks to bridge the gap 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) 14
̶ ̶ ̶ Potential Types of Financing (always additional) • Quasi-equity Typical Corporate 7 year deeply subordinated loan, • Broader scope of activities bullet repayment, deferrable interest, profit sharing mechanism, • On-balance sheet limited ability to accelerate, local • Revenues subject to market forces currency option (less predictable) • Working capital facility 3 year senior amortising loan with limited security requirements and local currency option • Development Financing Typical SPV (project finance) 3 year high yield loan with capitalised • Off-balance sheet vehicle interest, early-out option, cash exit at • Regulated environment Financial Close, or conversion to shareholder loan equivalent, i.e. • Numerous stakeholders complete alignment with sponsors • Contractual apportioned risk and ultimate exit post COD • Predictable cash flows 15
Analysis by business model Applications by Business Model Business Model by Region 100% 39.3% 12.8% 80% 60% 14.1% 40% 19.7% 20% IPP Utility SHS CPP Other PPP 0% Southern Africa East Africa Central Africa West Africa North Africa Americas Asia 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 IPP Utility SHS CPP Other 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 16
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 of partners, both in-country as well as global or European industry associations Information and support services are accessible through www.africa-eu-renewables.org 17
Thank you for your attention! Suggestions & Feedback always welcome! www.africa-eu-renewables.org Contact: Alexander Huppertz, alexander.huppertz@euei-pdf.org
EU Energy Initiative – Partnership Dialogue Facility (EUEI PDF) • 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
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