European Union Renewable Energy Financing instruments

European Union
Renewable Energy Financing
instruments

Claudio Bacigalupi
Team Leader Infrastructures
EU Delegation to Zambia

What the EU does in Zambia and globally
for the Energy sector
„

A distinction must be made between National instruments and Global ones.

„

At National level, funds are earmarked in what is called the National
Indicative Programme. In the case of Zambia, last financial cycle has
dedicated more than 240 Millions EURO to the Energy sector.
„

„

All this funds are now fully committed in projects related to Power
Generation (Kariba dam rehabilitation), Transmission (LTDRP transmission
for Lusaka), and Governance (IAEREP).

At Global level the EU is now promoting the use of new Financial
Instruments, like the use of t Guarantee schemes to address Private Sector
investments

How do we implement our interventions

„

At National Level we can indicate:
„

Blending modality (Kariba dam rehabilitation project, 60 Meuro grant)

„

Call for Proposals (IAEREP Demonstration projects, 25 Meuro grant)

„

Standard tendering procedures (LTDRP, ongoing 45 Meuro grant)

„

Sector Budget Support (n/a in Zambia)

„

Future Call on Energy Efficiency (ZE2ST, 25 grant contribution)

How do we implement our interventions
„

At Global level there are different instruments for enhancing the Private
sector participation
„

31 Meuro, EDFI ElectriFI Zambia is an EU-funded impact investment facility,
financing in early stage private companies and projects, de-risking investments,
focusing on new/improved electricity connections as well as on generation
capacity from sustainable energy sources. On-grid or off-grid renewable
energy generation or distribution project, creating or improving access to
electricity by adding new connections and/or increasing renewable
generation capacity.

„

EU guarantees schemes for Renewable Energy under EFSD - European Fund for
Sustainable Development , with a focus on the European Guarantee for
Renewable Energy (EGRE)

A bit more on Guarantees…
„

The External Investment Plan (EIP) is a new EU initiative launched in 2017

„

The EIP follows an integrated approach based on three interlinked pillars:

„

„

Pillar 1, the European Fund for Sustainable development (EFSD), with an
innovative guarantees and regional investment platforms/blending facilities

„

Pillar 2, Technical Assistance, seeking to develop financially attractive projects
as well as improvements to regulatory and policy environment and

„

Pillar 3, Policy reforms and dialogue.

EFSD investments should complement and reinforce efforts carried out in
the context of the Agreement on Climate Change (Paris Agreement).

…and again a bit more on EFSD…
„

„

There are 28 EFSD guarantees in the following priority areas:
„

Financing for MSMEs,

„

Agriculture,

„

Sustainable energy,

„

Connectivity

„

Sustainable cities,

„

Digitalisation

In April 2020, contracts had been signed with Financial institutions for about
40% of the total EIP guarantee amount of 1.5 billion EUR. The undisbursed
amounts are currently being recalibrated in order to facilitate the provision
of liquidity to sectors most exposed to the consequences of the COVID-19
crisis, which includes liquidity support for renewable energy.

…guarantees on Renewable Energies…
„

Seven guarantee schemes under the External Investment Plan are specifically
aiming at sustainable energy projects, three of those are:
„

European Guarantee for renewable energy (EGRE) with EIB, AFD, CDP and KfW. It will
address the lack of creditworthiness and delays in payment by off-takers, creating
around 12,000 jobs and 2GW renewable energy capacity in Sub-Saharan Africa,
with a guarantee of up to EUR 168 million and EUR 24 million of technical assistance,

„

The African Energy Guarantee Facility ‘AEGF’, which is a partnership with KfW and
forms part of EGRE, amounts to EUR 46 million. This guarantee will bring more
renewable energy generation to African countries by bridging the gap between
real and perceived risks in the African energy market.

„

AFD and EFSD guarantees will support an independently managed power
intermediary. GreenCo will buy electricity from renewable electricity generation
companies, and sell such electricity to both state-owned and private sector
companies that buy electricity ('off-takers') mitigating the risk of payment defaults.
This will allow to install around 330 MW additional renewable electricity generation
capacity and will result in new electricity connections for 600.000 households.

List
 of
 energy-­‐related
 guarantee
 schemes
 in
 the
 European
 Fund
 for
 Sustainable
 Development
 (EFSD)
 
 
Financial
Institution
 

Title of guarantee
scheme
 

Guarantee limit (Mn EUR)
 

Leverage
(expected)
 

Generation
capacity to be
supported
 

Estimated total
investments
 

Status
February
2020
 

AFD/EIB/
CDP/KfW
 

European
Guarantee for
Renewable Energy
 

168.5
 

Reorientation in
response to
COVID-19
 
168
 

AFD
 

Africa GreenCo
 

28
 

28
 

6,14 x
 

172
 

0.33 GW
 

Discussions
ongoing
 

AfDB
 

Room2Run
 

87
 

/
 


 


 

1 GW
 

Discussions
ongoing
 

AfDB
 

DESCOs Financing
Programme
 

50
 

/
 

5,5 x
 

275
 


 

Discussions
ongoing
 

AECID/
COFIDES
 

Renewable Energy
20
 
Support Programme
for Mainly Rural
Areas in SSA
 
Framework to Scale- 100
 
up Renewable
Energy Investments
covering only Tunisia
in Africa
 

20
 

8 x
 

160
 

120 MW
 

Discussions
ongoing
 

50 (100% NEAR)
 

10x
 

200
 

0.5 GW
 

EBRD signed
 

7,5 x
 

750
 


 

Discussions
ongoing
 


 


 


 


 


 

3834
 

3.95 GW
 


 

EBRD/
EDFI
 

EBRD
 

EBRD
 


 

Originally planned
 

Energy Efficiency
100
 
and Sustainable
Cities in EU
Neighbourhood
 
Sustainable Logistics 50
 
and
Interconnectivity
Guarantee (SLIG)
 

 
603.5
 

100 (Energy
Efficiency +
Logistics merged,
100% NEAR)
 

366
 

13 x
 

2190
 

2 GW
 

Signed by
KfW
 

…a bit more on EGRE - European
Guarantee for Renewable Energy
„

EGRE) is a European platform of collaboration for guarantees jointly proposed
by AFD, EIB, KfW and CDP to support the energy transition and expand energy
access in Sub Saharan Africa.

„

Key risks in renewable energy projects include the off-take risk and related risks,
such as convertibility and transferability risks. The credibility of the power
purchase agreement-PPAs constitutes a key risk affecting the bankability of
Independent Power Producers, the "IPPs".
„

It consists of four distinct yet complementary financial instruments:
„

Offtake Guarantees with a sovereign recourse (or "EGRE S");

„

Offtake Guarantees without a sovereign recourse (or “EGRE NS”);

„

European Liquidity Support for Sustainable Energy (or "RLSF+");

„

the African Energy Guarantee Facility (or "AEGF")

…objectives and status of EGRE
„

„

Objectives:
„

Promote renewable energy solutions to meet growing energy demand in
Sub Saharan Africa

„

Contribute to the transformation of country economies to become lowcarbon and climate resilient

„

Crowd in private sector funds for investment in renewable energy projects

„

Address a market failure (due to risk of non-payment by energy off-takers)

„

Bridge the gap between real and perceived risks in the African energy
market.

Status of the guarantees:
„

Signature of the guarantees with the Financial Institutions is undergoing.
Possible start of activities is in due course of 2021

Overview
 of
 the
 instruments
 under
 the
 European
 Guarantee
 for
 Renewable
 Energy
 (EGRE)
 

 

EGRE S
 

EGRE NS
 

RLSF+
 

Short term liquidity support to IPPs in case of non-payment
obligations of energy off-takers
 

Short description
 

Originally proposed
maximum guarantee
Amount (Mn EUR)
 

AEGF
 
Post
arbitration
award
 

Offtake
Guarantees with
sovereign
recourse
 

Offtake
Guarantees
without sovereign
recourse
 

European
Liquidity Support
for Sustainable
Energy
 

African
Energy
Guarantee
Facility
 

AFD: 40
CDP: 12.5
Total: 52.5
 

AFD: 10 Mn EUR
CDP: 12.5 Mn
Total: 22.5 Mn
 

KfW: 22., AFD: 25
Mn
Total: 47.5 Mn
 

KfW/EIB: 46
(signed
January
2020)
 

Total before reorientation: 168.5
 
Maximum guarantee
amount after COVID-19
reorientation of funds
(Mn EUR)
 

./. (not a priority,
likely to be
funded under
EFSD+)
 

AFD: 50
CDP: 12
Total: 62
 

Total: 60
(IFI distribution
tbd)
 

Total after reorientation: 168
 

46 (no
change)
 

Thanks for your attention!