Page 5 - AfrElec Week 33

AfrElec COMMENTARY AfrElec Credit: PowerGen
highlighted by Ra ki’s Rieger.
The merger comes just after Power Gen
sealed a ground-breaking $5.5m nancing deal in July with Cross Boundary Energy Access (CBEA), Africa’s rst project nancing facility for mini-grids, for 60 mini-grids in Tanzania providing power for 34,000 people.
is is the rst time that a long-term project finance structure, traditionally used to fund large-scale infrastructure projects, is being used in the rural mini-grid sector in Africa.
CBEA, which is backed by the Rockefeller Foundation and Ceniarth, has sourced most of the funds in the form of a $3mn innovative project finance loan from the UK govern- ment-backed Renewable Energy Performance Platform (REPP).
Pioneering model
e project model involves PowerGen devel- oping the assets, a er which it will sell them to CBEA on an ongoing basis soon a er comple- tion. PowerGen will then receive a developer premium and operating fee as it runs the grids in future. is aims to allow investors to invest in a larger consolidated asset – rather than a single mini-grid – and developers to raise revenues in the long term, thereby making the whole project a good bet for long-term investors.
is model is pioneering, as developers such as PowerGen have so far struggled to attract long-term nancing for their projects because each mini-grid rid is too small to be individually nanced.
To address this, CBEA established a special purpose entity in Tanzania that will purchase PowerGen’s existing and future operating mini- grids in Tanzania.
Crucially, CBEA said that it was working with the Tanzanian government to update the coun- try’s mini-grid regulations, and that a supportive
mini-grid regulatory framework was instrumen- tal in CBEA’s decision to invest in Tanzania.
Grid costs
e deal is a further boost for PowerGen itself. It was recently identi ed by the World Bank as the world’s leading mini-grid operator, running over 100 grids in seven African countries.
Indeed, the World Bank said in a recent report that falling costs made mini-grids one of the most e ective methods of providing univer- sal access to power in Africa and Asia by 2030.
e diminishing costs of solar panels and bat- tery storage mean that mini-grid capital require- ments in Africa have declined by over 50% in the last eight years.
Mini-grids have the potential to give 490 mil- lion people access to power by 2030 via 210,000 new projects at an investment cost of $220bn, mainly in sub-Saharan Africa and in Asia’s devel- oping countries, the bank said.
Smaller boutique and niche financers are attracted to companies such as PowerGen and its peers. For example, in Kenya pay-as-you-go power provider d.light solar recently secured $18mn of debt nancing from a group of ethical lenders, including Swiss private equity investor responsAbility Investments and green investor funds SunFunder, DWM and SIMA.
Indeed, micro-grids, which harness solar and battery technology together with mobile telephony-based pay-as-you-go technology, was described by the bank as playing a key role in boosting economic development and reduc- ing poverty in rural areas.
Developers are keen to have better regula- tions, increased scale and less investment risk. By taking over Ra ki Power and gaining access to new forms of blended nanced, PowerGen is blazing a trail for private investors to help make the World Bank’s forecasts a reality.™
PowerGen and
E.ON Off-Grid
Solutions have
shared a common
vision for a
long time: to
transform lives
by building the
energy system
of the future in
Africa
Aaron Cheng President PowerGen
Renewables
Week 33 21•August•2019 w w w . N E W S B A S E . c o m
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