The Regional Liquidity Support Facility (RLSF) has signed agreements with five African countries to provide financial assistance to their independent power producers (IPPs) against payment risks, noting that the lack of financial support often results in the project failures. These countries are: Benin, Burundi, Malawi, Uganda and Zambia.
RLSF is a joint initiative of the African Trade Insurance Agency (ATI) and KfW with funding coming from the German Federal Ministry for Economic Cooperation and Development (BMZ). It mainly supports small and mid-scale renewable energy IPPs of capacities ranging from 50 to 100 MW in sub-Saharan Africa by helping these projects reach financial closure.
“Our initial five partner countries are paving a path for what is possible in the African renewable energy space. By signing the RLSF agreement, these governments have committed to provide support to IPPs implementing projects in their countries. This sends a powerful message about their will to drive the renewable energy sector in Africa. We are optimistic that other countries across Africa will follow,” said George Otieno, the CEO of ATI.
In 2018, RLSF supported a 7.5 MW solar PV project in one of the four partner countries. It added an additional 15 percent to the country’s current capacity of 50 MW. The project is also the first grid-connected IPP in the country.
Electricity generated by non-renewable energy producers’ costs between $0.40-0.50/kWh compared to renewable energy costs between $0.10-$0.18/kWh. This makes renewable energy a viable alternative and the RLSF wants more African countries to join the initiative so that it can protect IPPs against the risk of delayed payments by public off-takers. It has been observed that lack of IPPs have often failed to access funding as the required guarantee was not available.
In recent years, Africa has become a hotspot for renewable energy financing with scores of financial institutions coming forward to support to African counties in building their renewable energy infrastructure.
For instance, recently, the Overseas Private Investment Corporation (OPIC), a United States Government agency, provided 600 million shillings (~$5.86 million) to CrossBoundary Energy, a Nairobi-based company which funds commercial and industrial solar in East Africa.
In June 2018, New Development Bank (NDB), an initiative by BRICS (Brazil, Russia, India, China and South Africa) countries, approved $300 million loan for sustainable development projects in South Africa.
Previously, the African Development Bank (AfDB) approved a ~$27.78 million proposal to secure a loan from Société Générale de Banque in Côte d’Ivoire (SGBCI), Crédit Agricole Corporate, and Investment Bank (Crédit Agricole CIB) to help Zola EDF Côte d’Ivoire (ZECI), an African solar power kit supplier.
Image credit: Azure