AfDB announces $90 million to transform SEFA and launches new report

$90 million in new donor commitments for the Sustainable Energy Fund for Africa (SEFA)

The African Development Bank (AfDB) announced $90 million in new donor commitments for the transformation of the Sustainable Energy Fund for Africa (SEFA) into a Special Fund.

The new SEFA Special Fund is expected to expand, be more flexible, as well as more responsive to Africa’s fast-changing energy market, with a sharper focus on green mini-grids and green baseload, and offering a wider array of catalytic finance instruments.

Denmark, SEFA’s founding partner, and first donor unveiled $10.65 million in fresh commitments; Germany extended $60.97 million to support SEFA’s green baseload activities, which aim to promote more sustainable baseload power generation options.

The Nordic Development Fund (NDF) announced a $12.19 million commitment, and the Swedish International Development Cooperation Agency has also added $8.98 million. The governments of the United States and the United Kingdom also affirmed their continued support for SEFA.

SEFA, managed by the Bank, is a special fund providing catalytic finance for renewable energy, with the goal of contributing to universal access to affordable, reliable, sustainable, and modern energy services for all Africans.

About SEFA

The Fund was established in 2011 in partnership with the Danish government. The governments of the United States, United Kingdom, Italy, Norway, Spain, Sweden, and most recently Germany and the NDF are donors.

Notable achievements include the Africa Renewable Energy Fund, the Facility for Energy Inclusion, and the Green Mini-Grid Market Development Programme. SEFA has also supported various developers in bringing their projects to fruition and advised countries on designing innovative renewable energy and energy access programmes.

AfDB launches Report on the role of Guarantee Products in Supporting Local Currency Financing of Sustainable Off-Grid Energy Projects in Africa

Universal and sustainable energy provision is a key priority across Africa. Countries are facing the dual objective of increasing the availability of energy to households and businesses while also decreasing the dependency on fossil fuels by adopting renewable and /or low carbon technologies.

In addition to relying on imported fossil fuels, most African countries are also reliant on hard currency debt for the financing of energy infrastructure. This creates significant exchange rate risks that are difficult to hedge and which can have profound implications for energy costs.

There is a strong case for developing the capacity and capabilities of local financial intermediaries to provide competitively priced local currency term credit to reduce reliance on hard currency financing. In the off-grid sector, this is particularly relevant for local commercial banks and institutional investors (where sizeable opportunities exist).

One approach to stimulating local currency lending is through credit enhancement products that provide risk mitigation for local currency lenders and institutional investors. The aim of this report is to assess this hypothesis by exploring the supply of and demand for local currency finance for off-grid renewable energy projects in Africa. Grid-connected renewable energy projects are also discussed, but only in the context of applying credit enhancement solutions in these markets.

The research includes in-depth examination of the markets in Ghana, Kenya, Nigeria, and Tunisia. It also explores the obstacles that developers and businesses face in tapping into local currency credit and capital markets and analyses the extent to which credit enhancement in the form of competitively priced guarantees – of multiple forms – could entice local banks and other financial intermediaries to provide local currency debt finance to the off-grid sector.

The intended outputs of this report are to provide information, analysis, and insights on local currency opportunities for off-grid energy businesses and projects, with the objective of stimulating private sector initiatives in the off-grid space.

The full Report is available here.