The German Development Bank (KfW) and the multinational African Trade Insurance Agency (ATI) have set up a €33 million credit facility to support renewable energy projects across Africa.
The facility will enable investors in projects with a capacity of up to 50 MW to receive a liquidity guarantee for a six-month period. This guarantee is expected to help developers in the case of payments delay on the part of mostly state-owned electricity customers, due to financial or political issues.
The Regional Liquidity Support Facility (RLSF), the KfW said, relieves the risk of the guaranteeing private banks, which facilitates the decision as to whether small and medium-sized green power plants are to be financed. Investors thus remain “liquid” even in difficult times.
“The RLSF stands for a strongly market-oriented approach, which is fully in line with KfW’s strategy to use and promote the resources of the private sector locally,” said Thomas Duve, the Director of the Department of Southern Africa and Regional Funds of KfW on the occasion of the signing of the contract in London.
The International Energy Agency (IEA) estimates that renewable energy growth on the African continent alone will be up by 73% in 2022, which equates to more than 24 GW of electricity. Small and medium-sized power plants play an important role in this because they can be implemented more quickly, provide electricity directly at the place of production and thus help to solve energy bottlenecks.
The new facility supports this expansion of sustainable power generation in African countries and, unlike other liquidity instruments used to hedge against credit risk, is spread over several years.