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

2 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

3 3

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

4

How can the RECP provide support?

5

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!

10

PV 34

SHS 12

Biomass 10

Biogas 8

Small Hydro

8

Other 22

Applications by Technology

0

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

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.

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%

Sou

ther

n A

fric

a

East

Afr

ica

Ce

ntr

al A

fric

a

We

st A

fric

a

No

rth

Afr

ica

Am

eric

as

Asi

a

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 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

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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

orientation, 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