French fund manager RGREEN INVEST and investment advisor ECHOSYS INVEST today announced the first closing of their new fund, the AFRIGREEN Debt Impact Fund, raising €87.5 million, which will be used to finance on-and off-grid solar power plants for small and medium-sized commercial and industrial consumers in Africa.
By displacing fossil fuel generation with solar power, commercial and industrial consumers will reduce electricity bills, increase reliability of power supply and lower greenhouse gas emissions and air pollution.
The first closing includes a commitment from the European Investment Bank (EIB), the International Finance Corporation (IFC), itself including a commitment from the Finland-IFC Blended Finance for Climate Program, the Belgian Investment Company for Developing Countries (BIO) and PROPARCO (French DFI, subsidiary of Agence française de développement Group). French private banks Societe Generale and BNP Paribas complete this first funding round. AFRIGREEN targets raising a total of €100 million from development finance institutions and private investors.
Investing in Africa’s EnR growth potential
“Africa boasts 39% of the world’s total renewable potential, and yet investment in renewable energy has been lagging behind, for a set of reasons that includes the lack of suitable financial instruments, which especially affects the most dynamic segment of the market, commercial and industrial solar users”, said Olivier Leruste, President of ECHOSYS INVEST, the joint-venture created to structure and manage the AFRIGREEN investment strategy.
Investments in renewable energy globally increased by 9% year-on-year, reaching an all-time high in 2021, according to a 2022 BloombergNEF report. However, investments dropped by 35% in Africa, representing just 0.6% of global renewable energy investments. AFRIGREEN will help bridge this funding gap through direct lending and asset-based debt facilities for regional and international developers as well as African commercial and industrial companies to develop solar photovoltaic energy infrastructure across Africa, with a particular focus on West and Central Africa.
Further, AFRIGREEN will be able to offer long-term local currency financing in Ghana and Nigeria with support from the International Development Association’s Private Sector Window Local Currency Facility. This is expected to significantly reduce the foreign exchange risk and materially increase the Fund’s competitiveness.
“Representing 90% of all businesses, small and medium-sized enterprises and industries are a segment that struggles to attract financing,” said Nicolas Rochon, RGREEN INVEST’s CEO. “With this vehicle we intend to deepen the partnership with our French and international partners to provide SMEs and SMIs in Central and West Africa with the backing they need to thrive. We target a diversified portfolio comprising twenty to thirty investments, intervening to meet long-term debt financing needs hovering between €10 and €15 million, with an average ticket around €5 million over 8 to 10 years.”
The first vintage of a new Impact Fund strategy
AFRIGREEN Debt Impact Fund is classified article 9 under the SFDR. It will contribute to the achievement of the Sustainable Development Goals 7 (Clean and Affordable Energy), 9 (Industry and Infrastructure), 12 (Responsible Consumption and Production) and 13 (Action on Climate Change) set by the United Nations.
The Fund’s impact targets will be measured in terms of MW installed, MWh produced, tons of CO2 emissions and litres of fuel avoided, number of companies directly or indirectly accessing new financing channel, and the number of commercial and industrial companies able to upgrade their power generation facilities and enhance their efficiency.
The Fund will also apply IFC Performance Standards and EIB Environmental and Social Standards that require the Fund to monitor its environmental and social impact by screening, categorizing, and conducting environmental and social due diligence on its investments.
ECHOSYS INVEST was created to structure and manage AFRIGREEN, benefiting from both ECHOSYS ADVISORY’s experience in emerging markets and RGREEN INVEST’s partnership network and expertise in flexible financial structuring.
“The European Investment Bank works with partners across Africa to enhance renewable energy generation. As the EU Climate Bank, the EIB is pleased to provide EUR 25 million to back targeted on- and off-grid solar investment by AFRIGREEN across West and Central Africa to support SMEs and SMIs in their energy transition, reduce fossil fuel imports and cut carbon emissions, said Ambroise Fayolle, EIB vice-president. “This is an innovative way to fund much needed solar power projects in West and Central Africa, which will provide more affordable electricity to commercial and industrial companies, lead to a reduction in greenhouse gas emissions by replacing more carbon intensive sources of power, and stimulate economic activity and job creation. By partnering with AFRIGREEN, we can accelerate the growth of the solar market in the region and make local currency available for Africa’s energy transition,” said Sarvesh Suri, IFC Director for Infrastructure and Natural Resources in Africa.
“Today marks an important milestone in the journey towards a more sustainable and equitable future for Africa. As we close The AFRIGREEN Debt Impact Fund dedicated to photovoltaic energy in Africa, we are proud to be part of a growing global movement to invest in solutions that both create positive social and environmental impacts, and generate financial returns,” said Vicky Carré, Investment Officer at BIO.
“By investing in AFRIGREEN, Proparco is proud to participate in leveraging – alongside the other investors – RGREEN INVEST’s operational excellence as well as Olivier Leruste and Alexandre Gilles’ extensive understanding of the sector. This is exactly the kind of initiative we need to support to meet the challenge of a sustainable future together, which requires the deployment of renewable energy on a large scale on the African continent, and in the world,” said Damien Braud, head of Equity Africa and Middle-East at PROPARCO.
“We are very pleased to support AFRIGREEN through this investment, which is fully in line with Société Générale Group’s Grow With Africa strategy for sustainable development in Africa. With a strong footprint in the continent and the support of its leading international experts on Impact Based Finance, Société Générale wants to be a leader in renewable energy financing in Africa; through this investment and this collaboration with the very high level teams of RGREEN INVEST and ECHOSYS ADVISORY, we confirm this ambition for the greater benefit of corporate and their access to energy,” said Philippe Dubois, Head of Corporate for Africa, Mediterranean & Overseas at Société Générale.
“The private financial sector has a key role to fund the development of energy access in Africa. Solar systems are an affordable, pollution-free, decarbonizing solution to help SME’s and SMIs have the energy they need to operate. BNP Paribas Impact Investing team is glad to be one of the first private sector actors to participate in AFRIGREEN, to fill the funding gap of long-term debt financing for solar projects and unlock the potential of these projects that make so much sense, environmentally and economically,” said Astrid Behaghel, Investment Director, Impact Investing BNP Paribas.