Annual Report 2015

PIDG FACILITIES

 

Technical Assistance Facility (TAF)

Providing grants for various forms of technical assistance within PIDG, to help Facilities overcome specific obstacles in the development of their projects

New grants in 2015

 

Cameroon Cameroon Agri-Business – GuarantCo

Ethiopia Ethiopia Geothermal VGF Preparation  – InfraCo Africa

Ethiopia Ethiopia Water Development Add-On – InfraCo Africa

Mozambique Mozambique Solar VGF Preparation – EAIF

Myanmar Myanmar Wind Power Capacity Development – InfraCo Asia

Nepal Nepal Power Sector Capacity Building – GuarantCo

Nigeria Nigeria Credit Enhancement Facility Part 2 Returnable Grant – GuarantCo

Rwanda Rwanda Bulk Water PPP–VGF Preparation, Part 1 – EAIF

Rwanda Rwanda Bulk Water PPP–VGF Preparation, Part 2 – EAIF

Achievements in 2015

In 2015, TAF approved nine grants totalling $2.113m. TAF’s work supported projects undertaken by EAIF, InfraCo Africa, InfraCo Asia and GuarantCo. Our grant-making programme had several highlights during the year:

TAF made a grant of $900,000 to GuarantCo to help set up a Nigeria Credit Enhancement Facility (NCEF) in partnership with Nigeria’s sovereign wealth fund. The grant was the first example of a ‘returnable’ TAF grant. This model, implemented as conditions allow, will enable TAF to make more efficient use of its limited resources.

TAF's support for InfraCo Africa’s Ethiopia Water Development Add-On will help pay for a feasibility study of how the water infrastructure required by a geothermal power project could be modified to deliver clean water to local communities. If viable, this will enable InfraCo Africa to increase the development impact of its Corbetti geothermal project.

TAF’s grant to InfraCo Asia to support the development of a bankable Myanmar Wind Power project will facilitate InfraCo Asia’s work to develop a renewable energy sector in Myanmar.

The activities funded by TAF to support InfraCo Africa’s Cabeólica Wind project in Cape Verde were completed in 2015.

 

Other notable highlights

The TAF performance evaluation was initiated in late 2015 and preliminary draft reports were positive about TAF performance and future plans.

Mid-way through the year, TAF and DevCo put forward a series of joint proposals for a major scale-up of the activities of the two Facilities and the concept was approved by the PIDG Governing Council in December. PIDG have identified technical assistance as vital to the successful closure of more developmental and additional projects. The TAF/DevCo scale-up will enable TAF to offer Facilities a wider range of grants and services designed to overcome barriers to successful development of privately financed infrastructure projects.

 

2016 and beyond

During 2015, the aftermath of the global financial crisis as well as new Basel banking rules continued to restrict the ability of banks to finance large infrastructure projects in poor countries. With less commercial finance available, the number of applications for TAF grant funding submitted by PIDG Facilities accelerated toward the end of 2015. TAF therefore anticipates that 2016 will be one of the busiest years in its history.

The Facility is excited to move forward with the TAF / DevCo scale up, which will enable it to meet the increasing need for early-stage grant funding to bridge the gap between concept and commercial reality for infrastructure projects in sub-Saharan Africa and south Asia.

 

Cape Verde Cabeólica

TAF grants supported the development of InfraCo Africa’s Cabeólica wind power project in Cape Verde

 

Meeting up to 25% of Cape Verde’s energy demands

Context

Home to around 470,000 people, Cape Verde is an archipelago of 10 islands located approximately 500km off the north-west coast of Africa. In the mid-2000s, Cape Verde was heavily dependent on expensive fossil fuel imports for electricity generation, with fuel accounting for up to 11% of the country’s total imports. Fuel security was a major concern, with residents impacted by regular power outages. In response, the Government of Cape Verde (GoCV) identified the potential of the country’s high average wind speeds (up to 10 metres per second) for the development of wind power as a sustainable, affordable alternative to imported fossil fuels.

 

Project

In spite of Cape Verde’s huge wind power potential, the GoCV struggled to attract private sector investment to progress the remote, complex project. In 2006, InfraCo Africa, through its principal developer eleQtra, was approached to develop the Cabeólica wind power project, a wind farm development on four of Cape Verde’s islands designed to generate up to 25.5MW of renewable energy. Cabeólica was Cape Verde’s first public-private partnership (PPP) energy project, to deliver commercial-scale wind power. TAF provided a $395,000 grant supporting the initial design and development of the project; funding capacity-building with government officials and related stakeholders; and a market assessment of Cape Verde’s electricity demand. The grant also paid for a technical feasibility study looking at the logistics of a multi-location wind farm project and a study exploring the financial implications for the GoCV and national utility, Electra, of the proposed power purchase agreement (PPA).

In 2010, InfraCo Africa requested a further $74,000 of TAF support to co-finance activity to reassure the GoCV regarding key contract documents. This second grant enabled the government to access appropriate financial and legal advice on the PPA proposed by Cabeólica and advice around broader PPP approaches for the provision of power services. This work enabled the successful completion of the project’s development and its timely financial close.

 

Impact

Now fully built and commissioned, Cabeólica is the first successfully closed commercial-scale PPP wind farm development in sub-Saharan Africa. Cabeólica provides approximately 25% of the country’s energy and has reduced power generation costs by about 20%. Cape Verde’s CO2 emissions have fallen by almost 55,000 tonnes per annum and the project has been recognised by the UNFCCC as a Clean Development Mechanism project. Cabeólica directly employs 10 full-time local staff members to manage and operate the four wind farms and sell the electricity to the local utility as per the PPA signed with eleQtra and the GoCV. The project has given the GoCV the knowledge and experience to pursue future PPPs in the renewable energy sector, and Cape Verde now leads the world in its government’s ambition to achieve 100% renewable energy supply by 2020.

Nigeria New ‘returnable’ grant will support establishment of Nigeria Credit Enhancement Facility (NCEF)

Nigeria is sub-Saharan Africa’s largest economy, however economic growth has been hampered by a largely inactive capital market. Stimulating capital market development in Nigeria will facilitate debt-financed infrastructure investment, improve provision of vital services, and generate employment. TAF previously supported an investigation by GuarantCo and the Nigeria Sovereign Investment Authority (NSIA) of the commercial viability of a credit enhancement facility in the country. Building on this earlier work, TAF has now made available a $900,000 ‘returnable’ grant to provide 50% of the seed capital needed to set up the NCEF. The facility will maximise the impact of NSIA funding, attracting other investors to infrastructure projects by facilitating bank borrowing or bond issuance. The returnable grant is a first of its kind for TAF. The grant will be repaid if NCEF successfully raises investment funding on the resident capital market.

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