IFC, a member of the World Bank Group, in partnership with Social Investment Managers and Advisors LLC (SIMA Funds or SIMA) and other financiers have reached the first close of a $150 million solar green bond, which will finance productive-use solar projects throughout Africa.
The bond will finance one of the largest impact-driven funds exclusively focused on furthering the rooftop solar sector in Africa, with an emphasis on small and medium-sized enterprises, which are harder to reach. It will offer short-term corporate financing and project financing of up to 10 years to support the growth of small and medium-size local developers for individual projects less than 5 megawatts (MW), focusing on manufacturing, services, education, healthcare, and agri-processing.
This is the first investment under the IFC and Global Energy Alliance for People and Planet (GEAPP) partnership to make strategic investments in distributed renewable energy (DRE) solutions, principally in Sub-Saharan Africa. IFC’s $45 million financing package for the solar green bond includes a $25 million IFC own-account loan and subordinated loans of $11 million from the Finland-IFC Blended Finance for Climate Program and $9 million from GEAPP.
Additional lenders for the $131 million first close include the Shell Foundation, the US Development Finance Corporation, the Schmidt Family Foundation, FMO, the Dutch entrepreneurial development bank, the German development finance institution (DEG), the Belgian Investment Company for Developing Countries (BIO), the Development Bank of Austria (OeEB). SIMA expects a second close led by private sector investors for an additional $25 to $30 million by April 2024.
Increasing access to clean, reliable, and affordable energy in Africa is key for achieving the Sustainable Development Goals and enhancing climate resilience. The bond aims to finance over 220 MW of on-site solar energy and energy storage projects that will provide energy savings, enhance value chains, and reduce fossil fuel consumption and carbon emissions by an estimated 4 million tons over the life of the assets.
“Although demand for solar solutions is growing rapidly, access to affordable financing is a major bottleneck for Africa’s smaller businesses. Solar projects still have higher capital costs than alternative polluting technologies, leading to continued heavy reliance on fossil-fuel backup generators,” said Sérgio Pimenta, Regional Vice President for Africa, IFC. “We’re pleased to be participating in this innovative partnership to help advance sustainable energy solutions.”
Vinay Bandaru, Partner, SIMA Funds, elaborated, “C&I solar presents a great opportunity to solarize productive use sector and impactful institutions such as hospitals and educational institutions. We are not chasing deals but identifying good developers to partner with and to do multiple projects with them while also providing coordinated technical assistance to help create a sub-segment of SMA developers focused on project less than 5MW. This bond is unique with its ESG numeric scorecard, ensuring a clear, quantifiable impact on environment, society, and governance. Our partnership with IFC enables us to channel our innovative approach to financing to many interested developers in Africa’s Least Developed Countries.”
“We are proud to partner with IFC and SIMA in the launch of this solar green bond that can help scale universal energy access and a just energy transition for Africa,” said Joseph Ng’ang’a, Interim CEO at GEAPP. “The transformation of renewable energy systems requires innovative financing models that can address investment gaps, which are one of the persistent barriers facing renewable energy entrepreneurs. Through this partnership we are demonstrating the viability of such models and the critical need for cross sector collaboration to help break down silos, pools resources, and encourage innovation.”
Support from Finland was also essential: “It is a strategic priority for Finland to partner with African countries to enable sustainable growth on the continent. Access to energy is essential for promoting economic growth, prosperity and innovation,” said Juha Savolainen, Deputy Director General of the Department for Development Policy at the Ministry for Foreign Affairs of Finland. “We also know that small and medium-sized enterprises are the engines of growth and crucial for creating new jobs. However, it is often difficult for SMEs to access finance. We are glad to have this opportunity to enable IFC to participate in this transaction.”
Moody’s has assigned the highest grading as part of their independent opinion on the Bond’s sustainability.
Clermount acted as financial advisor to SIMA in this transaction.
