African Renewable Energy Fund to support independent power producers

The African Renewable Energy Fund (AREF), a dedicated renewable energy fund focused on Sub-Saharan Africa closed on Wednesday the 12th of March with US $100 million of committed capital to support small- to medium-scale independent power producers (IPPs).

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The fund, which will be headquartered in Nairobi, is targeting a final close of US $200 million within the next 12 months to be invested in grid-connected development stage renewable energy projects including small hydro, wind, geothermal, solar, biomass and waste gas.  

Initially promoted in a joint initiative by the African Biofuel and Renewable Energy Company (ABREC) and the African Development Bank (AfDB), AREF will be managed by Berkeley Energy Africa Limited (Berkeley Energy), a fund manager focused on developing and investing in renewable energy projects in emerging markets. The fund will target IPPs with an ideal size of between 5 and 50 MW and a commitment per project of between US $10 million and US $30 million, with the capacity to source further funding from co-investors where necessary for a larger investment.

Africa Development Bank is the fund’s lead sponsor, bringing US $65 million in an equity investment package from its statutory resources as well as climate finance instruments such as Sustainable Energy for Africa (SEFA) and the Global Environment Facility (GEF) to leverage commercial and institutional investment. SEFA will additionally fund a Project Support Facility (PSF), which will provide resources to be deployed at an early stage to structure bankable deals.

“Over the past decade, the AfDB has established itself as a prime catalyst for renewable energy investment on the continent and is currently hosting the Africa Hub for the Sustainable Energy for All (SE4All) initiative. As Africa’s largest infrastructure finance partner, we understand the value of supporting both large-scale and small-scale projects as part of our strategy for Africa to promote inclusive and sustainable growth,” said Gabriel Negatu, AfDB Regional Director for the East Africa Regional Resource Center.

The investor group also includes West African Development Bank (BOAD), Ecowas Bank for Investment and Development (EBID), Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V. (FMO), Calvert Foundation, Berkeley Energy and ABREC, who are the vision-bearers of the fund.

Owned by 15 African Nations and five financial institutions, ABREC is a company specialized in developing, managing and advising public and private sector renewable energy and energy efficiency initiatives and projects.

Berkeley Energy’s Managing Partner TC Kundi said, “We are extremely pleased to have been entrusted this mandate by the AfDB and the other catalytic investors in the first close of AREF. The launch of a first pan-African dedicated renewable energy fund, with a centre of gravity in Africa, sourcing a majority of its capital from Africa at an exciting time in the evolution of macro-economic factors in Africa’s favour, presents a propitious environment for the investment of AREF. We aim to use Berkeley Energy’s technical and financial experience to ensure that a part of Africa’s growing need for power is met through responsibly developed clean energy projects that improve the generation mix and maximize the use of local resources”.

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