The African Development Bank’s board of directors have approved $15 million from the Sustainable Energy Fund for Africa (SEFA) and $10 million from the Clean Technology Fund (CTF) to advance African Renewable Energy Fund (AREF) II’s projects to boost low-carbon energy generation in sub-Saharan Africa.
SEFA’s contribution will comprise a package of $10 million in equity and a $5 million reimbursable grant. CTF, part of the Climate Investment Funds (CIF), will provide $10 million in equity. The combined contribution of $20 million from SEFA and CTF will go to capitalise AREF II’s catalytic tranche.
The reimbursable grant is earmarked for AREF II’s project support facility. According to the Bank, the financing will help small and medium-sized producers to add more than 800MW of hydropower, solar and wind power and battery storage in countries across sub-Saharan Africa.
“We are very excited to support AREF II at a time when, due to competing financing needs, on account of the cost impacts of the pandemic and for post COVID-19 recovery efforts, there is real risk of under-investment in the African power sector, including in renewables,” said Dr Kevin Kariuki, the Bank’s Vice-President for power, energy, climate and green growth. The Bank manages SEFA, a special fund, and is also a CTF implementing entity.
Capitalising the fund’s catalytic tranche is expected to attract critical private investment at a time of investment uncertainty and economic disruption owing to the ongoing COVID-19 pandemic and to ensure capital flows to support the delivery of sustainable power infrastructure to meet the region’s growing energy needs. AREF II Project Support Facility will work to bring projects to the required level of readiness and bankability.
AREF II, the second generation of the pan-African Renewable Energy Fund, is targeting a $300 million market capitalisation, and will be managed by Berkeley Energy, a well-established fund manager with extensive experience investing in renewable energy projects in Asian and African markets.
“We are proud to be able to continue our company’s mission of bringing reliable renewable power to countries and communities in Africa to support economic and social development, whilst also meeting the needs of our investors,” said TC Kundi, Berkeley Energy’s CEO. “The Berkeley Energy team is looking forward to working again with SEFA which has played an important role in launching AREF II,” he concluded.
SEFA provides catalytic finance for renewable energy to contribute to universal access to affordable, reliable, sustainable, and modern energy services for all in Africa, in line with the Bank’s New Deal on Energy for Africa and the United Nation’s Sustainable Development Goal 7.
Established in 2011 in partnership with the Government of Denmark, SEFA counts the United States, United Kingdom, Italy, Norway, Spain, Sweden, Germany, and the Nordic Development Fund among its donors.