To boost access to clean and reliable energy across Africa, on 22 December 2023 the IFC signed a financing package for the Facility for Energy Inclusion (FEI), a pan-African fund that supports small-scale decentralized renewable energy (DRE) projects, bringing power to Africa's commercial and industrial sectors and supporting economic activity.
IFC's financing will help fund the addition of about 115 MW of generation capacity across 15 African countries, including the Democratic Republic of the Congo, Ghana, and Kenya. The $80 million financing package comprises a loan of $30 million from IFC; a loan of $20 million mobilized from the Managed Co-Lending Portfolio Program (MCPP), which will enable longer-term financing that is not readily available in the market; and up to $30 million in blended finance. The blended finance package includes $15 million from the International Development Association's Private Sector Window Blended Finance Facility and $15 million from the Finland – IFC Blended Finance for Climate Program.
"This is a major milestone for FEI which is now recognized by key market players as a lead lender in the DRE market in Africa with $220 million commitments across 23 countries to date," said Orli Arav, Head of Debt Funds at Cygnum Capital Asset Management. "The partnership with IFC including a $20 million tranche from institutional investors represents a vote of confidence to Cygnum Capital as a leading fund manager."
"Our partnership with FEI will help support the development of Africa's DRE market and attract local and international private investment, strengthening the sector's capacity to reach commercial viability and scale," said Sarvesh Suri, IFC's Regional Industry Director for Infrastructure and Natural Resources in Africa. "With approximately 600 million people across sub–Saharan Africa without access to electricity, the DRE market offers a viable solution to expanding access to electricity across the continent by offering affordable and climate friendly energy solutions."
In many countries across Africa, utilities are unable to provide consistently reliable or affordable electricity, resulting in power outages and a reliance on fossil fuel backup generators. This project will help displace these carbon-intensive power sources and improve access, affordability, and the quality of electricity supply, while also supporting the growth of the nascent DRE market.
IFC's investment in the Facility for Energy Inclusion fund is aligned with the World Bank Group's strategy to accelerate the pace of electrification in Africa to achieve universal access by 2030.
FEI, which was established in 2019, provides debt financing for small-scale renewable energy generation and storage projects to power commercial and industrial companies, telecom infrastructure as well as mini grids. FEI is managed by Cygnum Capital Asset Management, an asset manager with an extensive track record of green investments in Africa. Earlier this year, IFC announced an investment in Cygnum Capital's AfricaGoGreen Fund to finance climate-friendly projects in Africa.
About Cygnum Capital
Cygnum Capital is an investment bank and asset manager, operating across frontier and emerging markets. Cygnum Capital Asset Management manages five pioneering funds: four debt funds including: (i) the African Local Currency Bond Fund (ALCBF), a ground-breaking investment vehicle established to support local currency capital markets, (ii) Off-Grid Energy Access Fund (OGE") which supports companies in off grid energy such as SHS and small- medium mini-grids, (iii) FEI which support companies that provide a range of renewable energy solutions such as medium - large mini- grids, commercial and industrial (C&I) and IPP with a maximum capacity of 25 MW, (iv) AfricaGoGreen (AGG) Fund which supports companies combating climate change by reducing the use of fossil fuels through new technologies and that increase energy efficiency; and a VC private equity fund (v) E3 Low Carbon Economy Fund for Africa (E3 LCEF) which invests in climate-smart services, digital connectivity & Applications, low-carbon productivity enablers. Cygnum Capital Asset Management has over USD 750 million of assets under management with investments in more than 27 African countries. https://www.cygnumcapital.com/
About the Facility for Energy Inclusion
FEI is designed to support small-scale independent power producers delivering power to the grid, mini-grids, C&I, and captive power projects. FEI was set up by the African Development Bank as part of its New Deal for Africa initiative. In addition to the investment by the AfDB, FEI received equity funding from the German Federal Ministry for Economic Cooperation and Development through KfW and Norfund, and a loan commitment from the Austrian Development Bank. The AfDB also invested on behalf of the Clean Technology Fund and the European Commission.
Additionally, FEI's Project Preparation Facility (PPF), funded by the Global Environment Facility, through the African Development Bank provides returnable grant funding for last-mile processes that are crucial to closing transactions and to fund due diligence and preparatory costs incurred in establishing innovative structures or transactions that FEI is seeking to lend to. https://www.feiafrica.com/
About IFC
IFC — a member of the World Bank Group — is the largest global development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2023, IFC committed a record $43.7 billion to private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity as economies grapple with the impacts of global compounding crises. For more information, visit www.ifc.org
About the IDA Private Sector Window
The International Development Association's (IDA) Private Sector Window was launched in 2017 to catalyze private sector investment in the poorest and most fragile countries. Recognizing the key role of the private sector in achieving IDA's objectives and the World Bank Group's twin goals, the window provides a source of co-investment funding and guarantees to de-risk private investments supported by IFC and the Multilateral Investment Guarantee Agency (MIGA). The IDA PSW is an option when there is no commercial solution, and the World Bank Group's other tools and approaches are insufficient: http://ida.worldbank.org/psw.
