- French fund manager RGREEN INVEST and investment advisor ECHOSYS INVEST have announced the first closing of their new fund, the AFRIGREEN Debt Impact Fund, raising €87.5 million, which will be used to finance on-and off-grid solar power plants for small and medium-sized commercial and industrial consumers in Africa.
By displacing fossil fuel generation with solar power, commercial and industrial consumers will reduce electricity bills, increase reliability of power supply and lower greenhouse gas emissions and air pollution.
The first closing includes a commitment from the European Investment Bank (EIB), the International Finance Corporation (IFC), itself including a commitment from the Finland-IFC Blended Finance for Climate Program, the Belgian Investment Company for Developing Countries (BIO) and PROPARCO (French DFI, subsidiary of Agence française de développement Group). French private banks Societe Generale and BNP Paribas complete this first funding round. AFRIGREEN targets raising a total of €100 million from development finance institutions and private investors.
Investing in Africa’s EnR growth potential
“Africa boasts 39% of the world’s total renewable potential, and yet investment in renewable energy has been lagging behind, for a set of reasons that includes the lack of suitable financial instruments, which especially affects the most dynamic segment of the market, commercial and industrial solar users”, said Olivier Leruste, President of ECHOSYS INVEST, the joint-venture created to structure and manage the AFRIGREEN investment strategy.
Investments in renewable energy globally increased by 9% year-on-year, reaching an all-time high in 2021, according to a 2022 BloombergNEF report. However, investments dropped by 35% in Africa, representing just 0.6% of global renewable energy investments. AFRIGREEN will help bridge this funding gap through direct lending and asset-based debt facilities for regional and international developers as well as African commercial and industrial companies to develop solar photovoltaic energy infrastructure across Africa, with a particular focus on West and Central Africa.
Further, AFRIGREEN will be able to offer long-term local currency financing in Ghana and Nigeria with support from the International Development Association’s Private Sector Window Local Currency Facility. This is expected to significantly reduce the foreign exchange risk and materially increase the Fund’s competitiveness.
“Representing 90% of all businesses, small and medium-sized enterprises and industries are a segment that struggles to attract financing,” said Nicolas Rochon, RGREEN INVEST’s CEO. “With this vehicle we intend to deepen the partnership with our French and international partners to provide SMEs and SMIs in Central and West Africa with the backing they need to thrive. We target a diversified portfolio comprising twenty to thirty investments, intervening to meet long-term debt financing needs hovering between €10 and €15 million, with an average ticket around €5 million over 8 to 10 years.”
The first vintage of a new Impact Fund strategy
AFRIGREEN is classified article 9 under the SFDR. It will contribute to the achievement of the Sustainable Development Goals 7 (Clean and Affordable Energy), 9 (Industry and Infrastructure), 12 (Responsible Consumption and Production) and 13 (Action on Climate Change) set by the United Nations.
The Fund’s impact targets will be measured in terms of MW installed, MWh produced, tons of CO2 emissions and litres of fuel avoided, number of companies directly or indirectly accessing new financing channel, and the number of commercial and industrial companies able to upgrade their power generation facilities and enhance their efficiency.
The Fund will also apply IFC Performance Standards and EIB Environmental and Social Standards that require the Fund to monitor its environmental and social impact by screening, categorizing, and conducting environmental and social due diligence on its investments.
ECHOSYS INVEST was created to structure and manage AFRIGREEN, benefiting from both ECHOSYS ADVISORY’s experience in emerging markets and RGREEN INVEST’s partnership network and expertise in flexible financial structuring.
Author: Bryan Groenendaal