The African Development Bank (AfDB) has approved US$15mn from the Sustainable Energy Fund for Africa (SEFA) and US$10mn from the Clean Technology Fund (CTF) to advance the African Renewable Energy Fund (AREF) II’s projects to boost low-carbon energy generation in sub-Saharan Africa
SEFA’s contribution will comprise a package of US$10mn in equity and a US$5mn reimbursable grant. CTF, part of the Climate Investment Funds (CIF), will provide US$10mn in equity. The combined contribution of US$20mn from SEFA and CTF will go to capitalise AREF II’s catalytic tranche. The reimbursable grant is earmarked for AREF II’s project support facility. The CTF contribution was approved by the CTF Trust Fund Committee in July 2020 under its Dedicated Private Sector Program (DPSP III).
The financing will help small and medium-sized producers to add more than 800 MW of hydropower, solar and wind power and battery storage in countries across sub-Saharan Africa.
“We are very excited to support AREF II at a time when, due to competing financing needs, on account of the cost impacts of the pandemic and for post COVID-19 recovery efforts, there is real risk of under-investment in the African power sector, including in renewables,” said Kevin Kariuki, vice president for Power, Energy, Climate and Green Growth at the AfDB.
Capitalising the fund’s catalytic tranche is expected to attract critical private investment at a time of investment uncertainty and economic disruption owing to the ongoing COVID-19 pandemic and to ensure capital flows to support the delivery of sustainable power infrastructure to meet the region’s growing energy needs. AREF II Project Support Facility will work to bring projects to the required level of readiness and bankability.
AREF II, the second generation of the pan-African Renewable Energy Fund, is targeting a US$300mn market capitalisation, and will be managed by Berkeley Energy, a well-established fund manager with extensive experience investing in renewable energy projects in Asian and African markets.
TC Kundi, CEO of Berkeley Energy, commented, “We are proud to be able to continue our company’s mission of bringing reliable renewable power to countries and communities in Africa to support economic and social development, whilst also meeting the needs of our investors. The Berkeley Energy team is looking forward to working again with SEFA which has played an important role in launching AREF II.”