Manufacturing and Energy

IFC and FEI Fund to boost access to clean energy in Africa with $80 million in funding

IFC has taken a significant step towards enhancing access to clean and reliable energy in Africa. They have recently signed a financing package for the Facility for Energy Inclusion (FEI), a fund that focuses on supporting small-scale decentralized renewable energy projects across the continent. This initiative aims to bring power to Africa’s commercial and industrial sectors, ultimately boosting economic activity.

Through this financing, IFC will contribute to the addition of approximately 115 MW of generation capacity in 15 African countries, including the Democratic Republic of the Congo, Ghana, and Kenya. FEI provides debt financing for small-scale renewable energy generation and storage projects, catering to the needs of commercial and industrial companies, telecom infrastructure, and mini grids.

The financing package amounts to $80 million and consists of various components. IFC will provide a loan of $30 million, while an additional $20 million will be mobilized from the Managed Co-Lending Portfolio Program (MCPP). This collaboration enables longer-term financing options that are not readily available in the market. Furthermore, the package includes up to $30 million in blended finance.

The blended finance component comprises $15 million from the International Development Association’s Private Sector Window Blended Finance Facility and another $15 million from the Finland – IFC Blended Finance for Climate Program.

Orli Arav, Head of Debt Funds at Cygnum Capital Asset Management, expressed their excitement about this achievement, stating, “This is a major milestone for FEI, as it is now recognized as a leading lender in the DRE market in Africa, with commitments totaling $220 million across 23 countries to date.” Arav also highlighted the significance of the partnership with IFC, which includes a $20 million tranche from institutional investors, as it demonstrates confidence in Cygnum Capital’s expertise as a fund manager.

Our collaboration with FEI will play a crucial role in supporting the growth of Africa’s DRE market and attracting both local and international private investment. This partnership will strengthen the sector’s capacity to achieve commercial viability and scale, ultimately benefiting the continent as a whole.

With a staggering 600 million people in sub-Saharan Africa lacking access to electricity, the DRE market offers a practical and sustainable solution to expand electricity access. By providing affordable and environmentally friendly energy solutions, we can make a significant impact in improving the lives of millions of people.

In many African countries, the existing utilities struggle to provide reliable and affordable electricity, leading to frequent power outages and a heavy reliance on fossil fuel backup generators. This project aims to address these challenges by displacing carbon-intensive power sources and enhancing access, affordability, and the overall quality of electricity supply.

IFC’s investment in the Facility for Energy Inclusion fund is in line with the World Bank Group’s strategy to accelerate electrification in Africa, with the goal of achieving universal access by 2030. By investing in this fund, we are actively contributing to the advancement of this important agenda.

FEI, established in 2019 and managed by Cygnum Capital Asset Management, brings a wealth of experience in green investments in Africa. Earlier this year, IFC also announced an investment in Cygnum Capital’s AfricaGoGreen Fund, further demonstrating our commitment to financing climate-friendly projects in the region.

Cygnum Capital, as an investment bank and asset manager operating in frontier and emerging markets, manages several innovative funds, including the African Local Currency Bond Fund (ALCBF). This fund is specifically designed to support local currency capital markets, paving the way for sustainable economic growth and development.

Through these strategic partnerships and investments, we are confident in our ability to drive positive change and make a lasting impact in Africa’s energy sector. Together, we can create a brighter and more sustainable future for the continent.

(i) African Local Currency Bond Fund (ALCBF), is a ground-breaking investment vehicle established to support local currency capital markets

(ii) Cygnum Capital Asset Management manages a substantial amount of assets, totaling over USD 750 million, and has made investments in more than 27 African countries. They have a diverse portfolio that includes various funds aimed at supporting different aspects of the energy sector.

(iii) One of these funds is the Off-Grid Energy Access Fund (OGE), which focuses on supporting companies involved in off-grid energy solutions such as solar home systems (SHS) and small to medium-sized mini-grids. This fund aims to bring electricity access to remote areas that are not connected to the main power grid.

(iv) Another fund managed by Cygnum is the FEI fund, which provides support to companies offering a range of renewable energy solutions. This includes medium to large-scale mini-grids, as well as projects in the commercial and industrial sector (C&I) and independent power producers (IPP) with a maximum capacity of 25 MW. FEI was established by the African Development Bank as part of its New Deal for Africa initiative and has received funding from various sources, including the German Federal Ministry for Economic Cooperation and Development, the Austrian Development Bank, and the Clean Technology Fund.

(v) Cygnum also manages the AfricaGoGreen (AGG) Fund, which focuses on supporting companies that combat climate change by reducing the use of fossil fuels through the implementation of new technologies and increasing energy efficiency. This fund plays a crucial role in promoting sustainable practices and reducing carbon emissions.

(vi) Lastly, there is the E3 Low Carbon Economy Fund for Africa (E3 LCEF), which invests in climate-smart services, digital connectivity, and applications, as well as low-carbon productivity enablers. This fund aims to support initiatives that contribute to a low-carbon economy and promote sustainable development in Africa.

With their extensive experience and diverse portfolio, Cygnum Capital Asset Management is well-positioned to contribute to the growth and development of the energy sector in Africa.

Moreover, the Project Preparation Facility (PPF) of the FEI, which is funded by the Global Environment Facility and administered by the African Development Bank, offers repayable grants to support the final stages of project development. These funds are essential for closing transactions and covering the costs of due diligence and preparation involved in establishing innovative structures or transactions that the FEI aims to finance.

As a member of the World Bank Group, the International Finance Corporation (IFC) is dedicated to promoting private sector development in emerging markets. With a presence in over 100 countries, we utilize our resources, expertise, and influence to create opportunities and foster economic growth in developing nations. In the fiscal year 2023, the IFC committed an unprecedented $43.7 billion to private companies and financial institutions in developing countries. This substantial investment aims to alleviate extreme poverty and drive shared prosperity, especially in the face of compounding global crises.

In 2017, the International Development Association (IDA) launched the Private Sector Window to stimulate private sector investments in the most vulnerable and impoverished countries. Recognizing the pivotal role of the private sector in achieving the IDA’s goals and the World Bank Group’s twin objectives, this window provides co-investment funding and guarantees to mitigate risks associated with private investments supported by the IFC and the Multilateral Investment Guarantee Agency (MIGA).

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