The African Development Bank’s Board of Directors has approved $15 million from the Sustainable Energy Fund for Africa (SEFA) and $10 million from the Clean Technology Fund (CTF) to advance African Renewable Energy Fund (AREF) II’s projects to boost low-carbon energy generation in sub-Saharan Africa.
SEFA’s contribution will comprise $10 million in equity and a $5 million reimbursable grant. CTF, part of the Climate Investment Funds, will provide $10 million in equity. The combined contribution of $20 million from SEFA and CTF will go to capitalize 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 Dr. Kevin Kariuki, the bank’s vice president for power, energy, climate and green growth. The bank manages SEFA and is also a CTF implementing entity.
Capitalizing 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 $300 million market capitalization and will be managed by Berkeley Energy, a fund manager with extensive experience investing in renewable energy projects in Asian and African markets.
SEFA provides catalytic finance for renewable energy to contribute to universal access to affordable, reliable, sustainable and modern energy services for all in Africa, in line with the bank’s New Deal on Energy for Africa and Sustainable Development Goal 7. Established in 2011 in partnership with the Government of Denmark, SEFA counts the U.S., UK, Italy, Norway, Spain, Sweden, Germany, and the Nordic Development Fund among its donors.
The CTF is a $5.4 billion global fund that promotes scaled-up financing for demonstration, deployment and transfer of low-carbon technologies with significant potential for long-term greenhouse gas emissions savings. Since 2010, when the bank became an Implementing Entity of the CTF, it has approved over $588 million resources for 10 projects across Africa.