The board of directors of the African Development Bank Group has approved an equity investment of up to $25 million in ARCH Africa Renewable Power Fund (ARPF), a $250 million private equity fund for renewable energy projects across sub-Saharan Africa.
ARPF will provide equity for the development and construction of 10 to 15 greenfield renewable energy projects in sub-Saharan Africa, adding about 533 MW of installed energy generation capacity from renewable sources in the region.
This will provide both base load and peak load power in underserved markets.
ARPF projects will focus on mature technologies including wind, solar PV, small to medium hydro, geothermal and biomass.
These would include grid-connected independent power producers and decentralized energy projects (commercial and industrial solar, mini-grids and solar home systems companies).
Greenfield projects
The fund’s strategy is to prioritize projects with a clear timeline to financial close, with emphasis on de-risking early stage greenfield projects.
The bank’s presence is expected to act as a catalyst for other investors to commit a further $60 million to $75 million equity from non-DFI sources.
The AfDB would also ensure that the highest environmental and social standards, together with climate change and gender considerations, are applied to the ARPF’s projects.
“Energy investments in Africa are constrained by limited well-structured, bankable projects, as well as by unavailability of risk capital. Renewable technologies require additional support to be fully competitive over fossil fuel-based energy generation,” said Amadou Hott, the Bank’s Vice-President for power, energy, climate change & green growth
. “ARPF will expand the pipeline of bankable energy projects in Africa, and complement and deepen the work of the Bank in this critical area. This is vital for economic growth, and to foster transition to low carbon across the continent.”
The fund is expected to reach first close in early 2019. The ARPF anchor investing entity is ARCH Emerging Markets Partners Ltd, a London-based emerging market investment joint venture.
This article was adapted from one that first appeared on the ESI Africa website.
