US$100M of funding has been committed to support small to medium-scale independent power producers (IPPs), including small hydro developers, through the African Renewable Energy Fund (AREF).
AREF, a dedicated renewable energy fund focused on Sub-Saharan Africa and headquartered in Nairobi, closed on 12 March with the US$100M capital, but is targeting a final close of US$200M within the next 12 months to be invested in grid-connected development stage renewable energy projects including small hydro, wind, geothermal, solar, biomass and waste gas.
Initially promoted in a joint initiative by the African Biofuel and Renewable Energy Company (ABREC) and the African Development Bank (AfDB), AREF will be managed by Berkeley Energy Africa Limited (Berkeley Energy). The fund will target IPPs with an ideal size of between 5 and 50MW and a commitment per project of between US$10M and US$30M, with the capacity to source further funding from co-investors where necessary for a larger investment.
Lead sponsor for the fund is the AfDB, which is bringing in US$65M in an equity investment package from its statutory resources as well as climate finance instruments such as Sustainable Energy for Africa (SEFA) and the Global Environment Facility (GEF) to leverage commercial and institutional investment. SEFA will additionally fund a Project Support Facility (PSF), which will provide resources to be deployed at an early stage to structure bankable deals.
"Over the past decade, the AfDB has established itself as a prime catalyst for renewable energy investment on the continent and is currently hosting the Africa Hub for the Sustainable Energy for All (SE4All) initiative. As Africa's largest infrastructure finance partner, we understand the value of supporting both large-scale and small-scale projects as part of our strategy for Africa to promote inclusive and sustainable growth," said Gabriel Negatu, AfDB Regional Director for the East Africa Regional Resource Center.
The investor group also includes West African Development Bank (BOAD), Ecowas Bank for Investment and Development (EBID), Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V. (FMO), Calvert Foundation, Berkeley Energy and ABREC.
"ABREC is proud to have its vision of an African renewable energy fund become reality," said ABREC's CEO and Chairman Thierno Bocar Tall. "This initiative, on which AfDB, Berkeley Energy and ABREC have worked closely together, is a significant milestone for realizing the potential of renewable energy in Sub-Saharan markets. AREF, as a private sector investment initiative, is a key component of ABREC's strategy that includes investment, development and advisory activities in relation with renewable energy projects across Africa."
