A renewable energy impact fund headed by former Scatec Solar head of business development Terje Osmundsen has reached its $8m first threshold commitment. Empower Invest will invest equity in 1-10MW renewable projects in developing countries, using a fund-based model to overcome the challenges of project financing smaller schemes. The series A share issue will allow Empower to invest in its first four to five projects. A $40m series B issue is planned for 2020.
Empower has built up with its partner developers a pipeline of projects in Ethiopia, Ghana, Kenya, Nigeria and Tanzania. Projects being lined up include a solar PV plant at a manufacturing company near Nairobi, a medium-sized hydroelectric power plant in an unelectrified village in south-west Rwanda in partnership with Norway’s Malthe Winje Hydropower, and a solar PV plant at a processing plant in Ghana.
The focus will largely be on distributed generation rather than supplying national grids. Empower believes that renewable energy will play a major role in power generation for climate targets to be met, but as national grids have limited capacity to absorb renewable power the biggest increases are likely to be in distributed generation. As a result, the fund is particularly targeting 0.5-2MW solar systems with 10 to 20-year sales contracts with commercial and industrial consumers, as well as medium-sized hydropower plants.
“We see many projects which are too small for non-recourse project finance,” Osmundsen told African Energy. “Our business concept is to team up with Africa-based developers who are developing local renewable energy projects and prepare the projects for equity financing from the fund. That way we can speed up implementation and execution of projects and speed up the deployment of renewable energy in the countries where we are working.” Osmundsen said the fund would have some flexibility around the types of project it could invest in, as long as they were backed by a credible medium or long-term power sales agreement.
The fund will not be involved in the development of projects, instead providing equity funding for construction. It will take majority stakes in the projects, building up a portfolio.
“We have a platform model where we work in partnership with developers. We are not doing the project development or engineering, we focus on investment and asset management,” Osmundsen said.
The fund model has been seen for several years as a prospective way to finance small-scale power projects in Africa, with a number of initiatives under way (AE 379/19). CrossBoundary Energy Access has been a particular proponent of the model and operates a similar fund targeting commercial and industrial consumers, as well as recently launching a fund to invest in mini-grids (AE 397/7, 389/10). The aim of the fund approach is to streamline the financing process to reduce the high transaction costs associated with smaller projects while bundling projects together to reduce financing costs.
Investors in the series A round include the fund manager Empower New Energy – whose partners are Osmundsen and Empower co-founders Ørjan Alexander Pedersen and Susie Scannelli Cook – Norwegian development fund Norfund, and the European Commission-funded Electrification Financing Initiative (ElectriFI), alongside Norwegian private investors Malthe Winje AS, the Elisabeth Grieg and Stig Grimsgaard Andersen family, Magne Orgland, Harald Magnus Andreassen and Svein Tveitdal, among others.
Empower was founded in 2017 and has offices in Oslo and Nairobi, as well as a representative office in Accra. The company was selected in the first round of the Luxembourg-based International Climate Finance Accelerator in 2018.
Susie Scannelli Cook, Co-Founder, Chief Investment and Legal Officer, Empower New Energy is participating in the Attracting new investors session at the sixth annual Africa Investment Exchange: Power & Renewables meeting (RSA House, London, 13-14 November).
AIX: Power & Renewables is co-produced by African Energy. More than 50 panelliets have already confimed
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