The German Development Bank and the African Trade Insurance Agency (ATI) have presented a new instrument to support renewable energy projects in sub-Saharan Africa.
The tool targets small- and mid-scale (up to 50MW) renewable energy projects.
The Regional Liquidity Support Facility (RLSF) is designed to help independent power producers (IPPs) develop renewable energy projects in the region to obtain the liquidity they need in the event that their off-taker (frequently a state-owned entity) delays payment.
The facility will provide immediate cash collateral supported by guarantees to a commercial bank that will in turn open a standby letter of credit the benefit of the IPP. Read more…
The amount provided will enable the IPP to operate and service the debt for up to six months.
Liquidity support facility de-risk private investment
Speaking at the launch, Jef Vincent, Senior Advisor to ATI, who has overall responsibility for the initial implementation of the facility, said: “Unlike some of the alternative solutions to the liquidity issue, ATI’s guarantee (as provided via the RLSF) will not require a counter-guarantee from the relevant Ministry of Finance, and as such we are confident this will be a very useful tool for those projects that we expect to support.”
KfW Director Southern Africa and Regional Funds, Dr. Thomas Duve, noted: “The RLSF is a strongly market-driven concept, emphasising KfW’s strategy to support and leverage the resources of local partners and the private sector.”
The facility, in combination with ATI’s traditional suite of political and trade credit risk insurance products, means that ATI will able to cover the full range of political and financial risks facing investors on such projects.
The German Federal Ministry of Economic Cooperation and Development (BMZ) through KfW will provide funding of up to €32.9 million ($38.8 million) to the facility.
Günther Nooke, Personal Representative of the German Chancellor for Africa, BMZ, said: “The RLSF will address a key challenge in renewable energy project finance and de-risk private sector investments.”
Featured image: Stock