The Norwegian Agency for Development Cooperation (NORAD) has pledged to provide a grant to the African Trade Insurance Agency (ATI) (www.ATI-ACA.org), worth 500 million NOK (about $56 million). The grant is intended for the continued implementation of ATI’s Regional Liquidity Support Facility (RLSF) and the development of additional insurance or guarantee products in support of renewable energy sector initiatives small and medium size. RLSF was established in 2017 to help fight climate change and attract additional investment by supporting renewable energy projects in sub-Saharan Africa.
The Norwegian Agency for Development Cooperation (NORAD) has pledged to provide a grant to the African Trade Insurance Agency (ATI) worth NOK 500 million ($56 million), divided over an initial period of 5 years. The grant will be directed towards the continued implementation of ATI’s Regional Liquidity Support Facility (RLSF), which aims to mobilize private investment in renewable energy projects in Africa while contributing to the realization of Sustainable Development Goals 7, 8 and 13, and the development of additional insurance or guarantee products in support of initiatives in the small and medium-sized renewable energy sector. NORAD funding, which will be split between first-loss cash guarantees for the various initiatives and technical assistance for ATI, will be provided by the Norwegian Ministry of Foreign Affairs.
RLSF was launched in 2017 by ATI and KfW, the German Development Bank, to address short-term liquidity risks in the financing of small and medium-sized renewable energy projects in sub-Saharan Africa, by combining the range of ATI insurance products with a liquidity support instrument. The RLSF policy is used in place of (or to supplement) the buyer payment guarantee provided by public buyers under power purchase agreements (PPAs) with independent power producers (IPPs). ). The risk targeted by the RLSF policy is late payment by the buyer beyond the credit period provided for in the PPA.
Since its launch, RLSF has supported four flagship solar projects in Burundi and Malawi, enabling over $150 million in project financing and a total installed capacity of 108.5 MW. Beyond the RLSF, ATI has supported other renewable energy projects in its member countries, enabling an installed capacity of over 500 MW. ATI’s current gross exposure in direct support of renewable energy transaction generation is $210 million – with NORAD grant and support, this exposure is poised to increase significantly over the long term. term.
RLSF is available to IPPs located in ATI member countries that sign the RLSF MoU. To date, Benin, Burundi, Côte d’Ivoire, Madagascar, Malawi, Uganda and Zambia have already signed the MoU with the hope that more of the twenty member countries of the ATI will follow. In addition to having access to the RLSF, IPPs operating in these countries can register for the transparency tool. The Transparency Tool is a web-based platform designed to show utility payment trends. Over time, the tool should bring greater transparency to the sector and potentially increase the confidence of investors and other stakeholders.
In addition to providing support to the RLSF, part of the grant will be used to develop additional guarantee or insurance instruments. These new instruments will place particular emphasis on the off-grid sector and other eligible forms of distributed renewable energy. A virtual launch ceremony will take place on 1st March 2022 at 3:00 p.m. EAT (1:00 p.m. CET) to officially announce this new cooperation between ATI and NORAD. For details on participation, please contact ATI by sending an e-mail to [email protected]
Quote from Manuel Moses, CEO of ATI
“ATI is proud to be NORAD’s strategic partner in this initiative, which will greatly enhance our initiatives in the renewable energy sector. Moreover, this partnership comes at an opportune time as Africa sees increased interest from public and private actors in the renewable energy sector. The grant will allow ATI to support more projects reaching financial close, thereby increasing power generation capacity and supporting sustainable economic growth in Africa. We are also excited about the opportunity to develop new products to help drive additional investment in distributed renewable energy sectors that have traditionally not benefited from the same level of funding and insurance support.
Quote from Thomas Duve, Director – Southern Africa, KfW
“To face the climate crisis, it is important to have a solid and reliable partner. This is why we are delighted to have NORAD on board as a strong partner of the RLSF. For Africa’s energy sector, this means another step towards renewable energy. KfW’s support with funding from the German Federal Ministry for Economic Cooperation and Development (BMZ) to the RLSF demonstrates our commitment to this process and to the development of a sustainable energy market in Africa. Only with this can we address the fundamental challenges of energy access, energy security and climate change.
Quote from Bård Vegar Solhjell, Director General of NORAD
“This innovative instrument helps unlock the private finance needed to close the energy access gap, while contributing to the reduction of greenhouse gas emissions. It is an important tool to catalyze much needed business investment in/to the energy sector in Africa. Dialogue with renewable energy developers has confirmed the great relevance of liquidity guarantees. Thus, we are confident that NORAD’s support to RLSF will help accelerate investments in renewable energy in sub-Saharan Africa. NORAD’s decision to support the RLSF is based on a thorough assessment. ATI has been identified as a very capable institution, and NORAD looks forward to good cooperation with ATI and KfW.
Distributed by APO Group on behalf of the African Trade Insurance Agency (ATI).
African Trade Insurance Agency
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About the African Trade Insurance Agency:
ATI was founded in 2001 by African states to cover the commercial and investment risks of companies doing business in Africa. ATI primarily provides political risk insurance, credit insurance and surety insurance. In 2020, ATI closed the year with gross exposure of US$6.3 billion and net profit of US$39.4 million, driven by strong demand for ATI’s insurance solutions from the international financial sector and African governments. Since its inception, ATI has supported $70 billion in investment and trade in Africa. For more than a decade, ATI has maintained an “A/Stable” rating for financial strength and counterparty credit by Standard & Poor’s, and in 2019, ATI earned an A3/Stable rating from Moody’s. www.ATI-ACA.org
About the Regional Liquidity Support Facility (RLSF):
ATI and the German Development Bank, KfW, with funding from the German Federal Ministry for Economic Cooperation and Development (BMZ), launched the RLSF in 2017. The Facility was created to help combat climate change and attract investments by supporting renewable energy projects in member countries. RLSF has an initial capacity of €63.2 million and supports small and medium-scale renewable energy projects with an installed capacity of up to 50 MW (and in exceptional cases up to 100 MW) by protecting promoters against the risk of late payment by public purchasers; thus improving the bankability of projects and ensuring that more projects reach financial close. https://bit.ly/3gw8NaP
About KfW Development Bank:
KfW is Germany’s leading development bank, 100% owned by the German government and the Länder. It is one of the main implementing agencies of German development cooperation. On behalf of the German federal government, KfW finances investments and advisory services in developing countries, usually together with government institutions. KfW projects aim at sustainable economic development, social infrastructure and environmental protection. www.KfW.de
NORAD is the Norwegian Agency for Development Cooperation. The Agency is a directorate under the Norwegian Ministry of Foreign Affairs. With respect to Norway’s International Climate and Forest Initiative (NICFI), NORAD falls under the Norwegian Ministry of Climate and Environment. NORAD’s main objective is to ensure that Norwegian development aid funds are spent in the best possible way and to report on what works and what does not. In addition to grant programs, NORAD’s main tasks are aid advisory services, quality assurance and monitoring, communication and evaluation.https://bit.ly/2Zpq2Sw
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