Thursday, February 29, 2024

$150 million initiative launched to support solar energy in Africa

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The International Finance Corporation (IFC), part of the World Bank Group, has teamed up with Social Investment Managers and Advisors LLC (SIMA) and various financing partners to initiate a $150 million solar green bond. Announced on February 7, 2024, in Washington, D.C., this groundbreaking initiative aims to provide financial support for productive-use solar projects across the continent, with a special focus on benefiting small and medium-sized enterprises (SMEs). 

Targeting the burgeoning rooftop solar sector, this investment seeks to address the challenges faced by smaller businesses in accessing affordable financing. Despite the growing demand for solar solutions in Africa, the high capital costs associated with solar projects compared to conventional polluting technologies have hindered progress, leaving many SMEs reliant on fossil-fuel generators. 

The bond is poised to finance over 220 megawatts (MW) of on-site solar energy and energy storage projects. These endeavors are expected to result in significant energy savings, enhance local value chains, and contribute to the reduction of fossil fuel use and carbon emissions, with an estimated avoidance of 4 million tons of carbon over the assets’ lifespan. 

This initiative represents the inaugural investment under the collaboration between IFC and the Global Energy Alliance for People and Planet (GEAPP), focusing on strategic investments in distributed renewable energy solutions, primarily in Sub-Saharan Africa. The financing package from IFC for the solar green bond totals $45 million, including a direct IFC loan and subordinated loans from the Finland-IFC Blended Finance for Climate Program and GEAPP. 

The first close of the bond has attracted $131 million, featuring contributions from an array of lenders, including the Shell Foundation, the US Development Finance Corporation, and the Schmidt Family Foundation, among others. SIMA anticipates a second closing, targeting an additional $25 to $30 million from private sector investors by April 2024. 

The project underscores the critical need for clean, reliable, and affordable energy in Africa to achieve the Sustainable Development Goals and bolster climate resilience. IFC’s Regional Vice President for Africa, Sérgio Pimenta, emphasized the significance of this partnership in overcoming financial barriers and advancing sustainable energy solutions across the continent. 

Highlighting the unique aspects of this bond, Vinay Bandaru, Partner at SIMA Funds, noted its innovative approach, including an ESG numeric scorecard to measure impact on environment, society, and governance. This initiative not only aims to finance impactful solar projects but also to foster a dedicated segment of small and medium-sized solar developers focusing on projects under 5MW. 

Joseph Ng’ang’a, Interim CEO at GEAPP, and Juha Savolainen, Deputy Director General at the Finnish Ministry for Foreign Affairs, both expressed their support for this initiative, underscoring the importance of innovative financing models and international collaboration in achieving universal energy access and a just energy transition in Africa. 

The bond has received the highest grading from Moody’s in its independent assessment of the bond’s sustainability, affirming its potential to make a significant impact in the renewable energy sector in Africa. 

Solomon Irungu
Solomon Irunguhttps://solomonirungu.com/
Solomon Irungu is a Communication Expert working with Impact Africa Consulting Ltd supporting organizations across Africa in sustainability advisory. He is also the managing editor of Africa Sustainability Matters and is deeply passionate about sustainability news. He can be contacted via mailto:solomonirungu@impactingafrica.com

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