Financing solar energy projects in Central and West Africa
The Afrigreen Debt Impact Fund attracts a consortium of investors as part of its first closing.
The Afrigreen Debt Impact Fund investment fund was created jointly by the French asset manager Rgreen Invest and Echosys Advisory - specializing in renewable energy projects in emerging markets - to support commercial and industrial consumers in Africa in their energy transition by promoting the adoption of photovoltaic solutions. Afrigreen aims to support the financing of decentralized solar power generation projects in Central and West Africa, focusing primarily on Nigeria, Côte d'Ivoire, Senegal, Ghana, Mali and Cameroon, and targeting mainly countries where the grid is unreliable and electricity prices are high.
The Fund completed its first closing of 87.5 million euros. The deal was announced on 24 February and brought together several international investors: it includes a commitment from the European Investment Bank (EIB), the International Finance Corporation (IFC, World Bank group) including participation from the Finland-IFC Blended Finance for Climate Program, the Belgian Investment Company for Developing Countries (BIO) and Proparco (AFD group). The only private investors to join the consortium, Societe Generale and BNP Paribas, complete this funding round.
By displacing fossil fuel with solar power generation, commercial and industrial consumers will reduce electricity bills, increase reliability of power supply and lower greenhouse gas emissions and air pollution. The resulting expected impact is a reduction in greenhouse gas emissions of by 58,000 tons annually and a reduction in the consumption of fuel by 14 million liters per year.
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, consumer and industrial solar users.
Afrigreen Debt Impact Fund, which is aiming for a target size of €100 million at its final closing, will invest in a diversified portfolio comprising 20 to 30 investments. The fund will intervene to meet long-term debt financing needs between 10 and 15 million euros, with an average ticket of around 5 million euros over 8 to 10 years. Afrigreen will also offer longer term and local currency financing, specifically in Ghana and Nigeria to reduce foreign exchange risks.
Representing 90% of all businesses in Africa, small and medium-sized enterprises and industries are a segment that struggles to attract financing. 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.
For Societe Generale, this transaction perfectly fits into the Grow With Africa initiative and illustrates one of the four pillars: research & development for agribusiness, the blue economy and the financing of new access to renewable energy (mainly solar but also hydraulic, wind, biomass).
We are very pleased to support Afrigreen through this investment, which is fully in line with Societe Generale 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 in Impact Based Finance, Societe Generale wants to be a leader in renewable energy financing in Africa; with this investment and this collaboration with the very experienced teams of Rgreen Invest and Echosys Advisory, we confirm this ambition for the greater benefit of our corporate clients in terms of decarbonization and savings.
Afrigreen is part of the ecosystem of partners that are essential to our bank's entry into new markets with high positive impact and high growth potential. Learning from this investment, Societe Generale will be able to develop an offer dedicated to these small-scale solar deals, whose complexity is exacerbated by the absence of an internal track record and the location of projects in developing countries. Based on a rigorous selection of opportunities with an attractive risk/return/impact, Afrigreen's investment strategy is also perfectly aligned with our Impact Based Finance approach, which aims at reducing the SDG funding gap by focusing on impacts to create more value and attract the growing pool of private institutional investors searching for both yield and impact.
Afrigreen 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.