Loans make up 97% of new funding in May

From the newsletter

Loans and debt accounted for more than 97% of May's total funding in the renewables sector. Morocco secured investments worth $14 billion for its power and water sector. Though not specified, the financing is expected to come from loans and equity from the Mohamed VI Investment Fund, utility TAQA Morocco, and the energy company Nareva.

• Almost 3% of the new money was philanthropic. Malawi secured a $350 million grant from the World Bank for the Mpatamanga Hydropower Project, the country's single largest project in history. It is expected to reduce electricity tariffs for consumers.

• May's funding rounds lacked venture financing, signalling the sector's greater maturity. It has progressed past early, high-risk phases and now has a proven business model that attracts a wider range of investors.

More details

• Nigeria secured $1.25 billion in commitments from two key financial institutions. The Nigerian Capital Development Fund (NCDF) has committed $1 billion, which it will mobilise through public-private partnerships, blended finance structures, and the mobilisation of diaspora capital. Additionally, the Development Bank of Nigeria (DBN) has committed $250 million. DBN is raising this capital through its accreditation with the Green Climate Fund (GCF), aiming to bridge Nigeria's green and climate finance gap.

• Ethiopia struck deals with Chinese and Japanese investors who will invest in solar manufacturing. They are expected to raise money through loans to finance the projects. About $364 million is earmarked for solar cell manufacturing between two companies. On top of that, an additional $250 million will be raised to finance solar energy development.

• EAAIF, a PIDG company managed by Ninety One, raised $325 million in new debt facilities, bringing total recent raises to $620 million (surpassing its $500 million target). These funds are to be deployed in critical infrastructure (digital, power, transition) across Africa and Asia by 2028.

• The African Development Bank (AfDB) played a major role in financing two significant projects through concessional loans: the development of a 62 MW greenfield solar photovoltaic power plant in Sokodé, Togo, at $30 million, and the construction of a transmission line and related electricity infrastructure in Mozambique, at $43.6 million.

• At the company level, Sunking Nigeria, a solar home system provider, received the highest amount of funding. It secured $80 million in local currency financing. This marks a big step in the company's journey of providing affordable financing options to its clients, especially through Pay-As-You-Go (PayGo) systems. Unlike dollar-denominated loans, this won't be affected by exchange rate fluctuations.

• Axian Energy, clean cooking appliance manufacturer, Burn, and minigrid developer Husk Power all secured $5 million each in loans for their expansion.

Our take

• PPP deals are revolutionising energy projects, pushing them to gigascale and setting new records. With governments encouraging more private sector involvement, we expect a rise in major investments.

• Energy companies should actively explore a wider range of financing options. Private equity funds and commercial banks are particularly well-positioned to play a significant role in supporting companies and projects with lower risk profiles. 

• To truly boost investment and reduce risks in the energy sector, more concessional loans are needed to de-risk investments in emerging markets or for new technologies. These will attract more investors and unlock significant capital.