AfDB approves $825,000 for green technology projects in Africa

The Sustainable Energy Fund for Africa (SEFA), a joint initiative of the Danish government and the Energy, Environment and Climate Change Department (ONEC) of the African Development Bank (AfDB), has approved its first grant of $825,000 to finance the concept phase of the Green Tech Financial Facility.

The facility, which was launched on August 17, 2012, is a vehicle for investments in private-sector driven green technology projects – including market scoping and positioning studies, fund conceptualisation and fund manager selection.

According to the African Development Bank, the grant will be coordinated and monitored by a task team from the Private Sector Department of the AfDB, working closely with the African Biofuel and Renewable Energy Company (ABREC) and the SEFA Secretariat.

The AfDB says what informed approval of the grant is the absence of a coherent investment framework to support the “green growth” development agenda in Africa and elsewhere, and the fact that climate-oriented facilities designed to address this problem channel capital from predominantly public contributions.

In a statement, the Bank said “While Multilateral Development Banks (MDBs) have achieved some success leveraging private finance using a variety of instruments, mainly through Climate Investment Funds, these initiatives lack sufficient scale to meet global climate finance needs.”

In view of that, it says there remains untapped potential to design an appropriate financing mechanism that systematically channels private capital into environmentally-sound technologies that improve resource efficiency and economic competitiveness while reducing carbon emissions.

AfDB disclosed that the SEFA grant will therefore support it in structuring and launching an investment facility aimed at increasing private capital flow, channeled to private sector-led projects that implement carbon-reducing and clean technologies for Africa.

The optimal structure and fund management protocol for the financial facility will be informed by thorough market research and analysis, it says, adding, “The grant will also support the design of a Technical Assistance Facility to provide capacity and implementation support to the investee companies.”

According to  the AfDB, the grant aligns with SEFA’s equity investment window and ABREC’s African Biofuel and Renewable Energy Fund could thus become a vehicle for SEFA (as a co-investor) to direct investments to SMEs along the clean energy value chain.

SEFA was established in 2011 with a commitment from the Government of Denmark of DKK 300 million (approximately $56 million), and was open for business at the start of 2012.

It is currently operating under two components named as the Project Preparation Grants (PPG) and Equity Investments (EI).

The PPG will facilitate the preparation of small and medium-scale renewable energy (RE) generation and energy efficiency (EE) projects requiring total capital investments of $30 -75 million, while Equity Investments will seek to address the lack of access to start-up and growth capital for SMEs, as well as their limited managerial and technical capability, and targeting of RE and EE projects in the $10-30 million range.

SEFA is structured to be used as a flexible multi-donor/multi-purpose platform to support the access to sustainable energy agenda in Africa, and one of Africa’s potential instruments under the UN’s Sustainable Energy for All Initiative.

By Edmund Smith-Asante

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