Launched by RGreen and Echosys Advisory, the new fund aims to improve financing for the development of Africa’s solar energy resources.
French-based RGreen Invest and Echosys Advisory said their Afrigreen Debt Impact Fund, established to finance renewable energy supply to African SMEs, had secured gross commitments of €87.5m at its first close, out of an overall target of €100m.
Investors to commit so far include the European Investment Bank (EIB) and the International Finance Corporation (IFC), whose investment includes a commitment from the Finland-IFC Blended Finance for Climate Program.
Others are the Belgian Investment Company for Developing Countries (BIO), French development institution Proparco, and French banks Societe Generale and BNP Paribas. The EIB said its share of the commitments was €25m.
The fund is managed by Echosys Invest, a vehicle created by the two partners, which they say benefits from Echosys Advisory’s experience in emerging markets and RGreen Invest’s partnership network and expertise in flexible financial structuring. It is classified as an Article 9 fund under the EU’s Sustainable Financial Disclosure Regulation (SFDR).
Afrigreen will provide direct lending and asset-based debt facilities for regional and international developers, and African commercial and industrial firms to develop on and off-grid solar photovoltaic infrastructure with a particular focus on West and Central Africa.
It will also 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 intended to reduce foreign exchange risk and increase the fund’s competitiveness.
The fund is targeting a “diversified” portfolio of 20-30 investments to meet long-term debt financing needs hovering in the €10m-15m range, with an average ticket size of around €5m, over 8-10 years.
The partners are aiming to help plug a huge gap in financing for renewable power supply to small- and medium-sized industrial (SMI) and commercial consumers. Investments in African renewable energy projects accounted for 0.6% of global renewable energy investments in 2021, despite the continent playing host to an estimated 39% of the world’s total renewable energy potential, they said, citing a 2022 Bloomberg NEF report.
Furthermore, investment is concentrated in just a few markets. From 2010 to 2021, South Africa, Egypt, Morocco, and Kenya accounted for nearly three-quarters of all renewable energy asset investment in African markets ($46 billion), with only $16bn being directed to rest.
Nicolas Rochon, RGreen Invest’s CEO noted SMEs represent 90% of all businesses on the continent. “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,” he said.
RGreen said the fund’s impact targets would be measured in terms of power generating capacity installed, power produced, CO2 emissions levels and the amount of fuel avoided. Also taken into account would be the number of companies directly or indirectly accessing the new financing channel, and the number of 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. These require the fund to monitor its environmental and social impact by screening, categorising, and conducting environmental and social due diligence on its investments.