Financing access to sustainable energy
Financing access to sustainable energy
Our mission PROPARCO’s financing aims to contribute to growth, sustainable development and to achievement of the Millennium Development Goals. In developing and emerging countries, PROPARCO’s priority is to support the creation and upgrading of energy infrastructure, in particular renewable energies. Energy infrastructure is an essential prerequisite for development. It helps attract foreign investors, it fosters the creation of local companies and contributes to the fight against climate change.
OLKARIA III First private geothermal power generation project in Africa PROPARCO has allocated a US$15m direct loan to Ormat Group in Kenya to finance the capacity expansion of the first geothermal power plant to be financed, built and operated by a private operator in Africa. Thanks to the Olkaria III project, this power plant, which is located in the Rift Valley 100 km from Nairobi, has increased its power generation fourfold from 13 MW to 48 MW. The aim of the Olkaria III project is to help build an accessible and reliable power sector, a core factor for Kenya’s economic development and future growth. Using geothermal resources reduces dependence on hydrocarbon imports and makes it possible to diversify the energy mix.
Indeed, Kenya’s power sector has a generation safety margin of under 10% meaning there is a risk of shortages. This risk is heightened by the fact that a large share of power generation today depends on unpredictable rainfall since 40% of production comes from hydropower. In addition, Olkaria III reduces greenhouse gas emissions by 177 000 Teq CO2 a year. The project complies with World Bank environmental and social standards and was registered under the United Nations’ Clean Development Mechanism in 2010.
Public-private partnerships PROPARCO has been supporting private operators in their increasingly important role in infrastructure management for over 15 years now, particularly under public-private partnerships. PROPARCO has financed Morocco’s first wind farm and the first power generation and supply operations under private concessions in Sub-Saharan Africa. Between 2007 and 2010, PROPARCO’s financing and cofinancing contributed to: • Connect over 1 million people to an electricity distribution network, • Generate 2 242 MW of renewable energy power, • Reduce annual greenhouse gas emissions by 8.1 million Teq CO2.
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Our priority: energy in Africa
PROPARCO’s business area covers four continents. It focuses its investments on Africa, a cornerstone of its strategy, where the need for energy infrastructure is both urgent and essential for the continent’s growth and development.
PROPARCO and AFD’s strategy to address these challenges is based on: • Financing power generation infrastructure projects using either conventional or renewable energies. PROPARCO also finances projects of gas production and transmission, as well as electricity transmission and supply. • Supporting private equity investments via FISEA (Investment and Support Fund for Businesses in Africa) in order to assist promoters and foster their emergence. The aim of this fund is to promote the growth of businesses and financial institutions in Sub-Saharan Africa by giving them access to equity and helping them manage their investments. • Supporting African governments by benefiting from Agence Française de Développement’s expertise. The aim is to promote an institutional framework that is conducive to the creation of sustainable energy infrastructure and to the development of public-private partnerships. PROPARCO is the largest bilateral financial player in Sub-Saharan Africa with EUR420m invested in 2010, i.e. 45% of its business. PROPARCO has a network of 7 regional offices and 34 AFD agencies in Africa to support its expertise in
BUJAGALI Doubling power generation in Uganda In December 2007, PROPARCO and AFD signed a US$73m loan agreement with Bujagali Energy Limited (“BEL”) to finance the construction of the Bujagali Dam in Uganda. With 9% of the population connected to an electricity distribution network, Uganda is one of the world’s most lagging countries in terms of access to electricity. The project to build a 250 MW hydropower plant is essential to offsetting the country’s high energy deficit. When operational in 2012, the dam will generate almost half of the energy produced in Uganda and will reduce greenhouse gas emissions by 1.5 million Teq CO2 a year. AFD Group has designed a wide range of long-term products that will reduce the tariff for the final consumer. In addition, the subsidized part of the EUR13m soft loan allocated by AFD will be earmarked for additional measures to enhance the project’s Environmental and Social Management Plan. This plan involves increasing the number of drinking water points, rural electrification, replanting the banks of the Nile downstream from the dam and promoting ecotourism. The project will also create 1 100 direct jobs during the dam construction phase. Finally, it will contribute US$300m to the State budget by 2023 through taxes and US$800m during the concession period.
the energy sector on the continent.
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AES SONEL Upgrading the power supply grid in Cameroon The EUR30m loan agreement PROPARCO signed in December 2006 with AES SONEL, Cameroonian electricity company privatized in 2001, financed the company’s 3-year development program. PROPARCO’s investment, alongside several European and international partners, has helped upgrade, renew and extend electricity transmission and supply networks and improve existing hydropower plants. This concession for electricity supply, transmission and generation is one of the few existing in Africa. It should ultimately benefit over 4 million people, either through network connections or service improvements.
Promoting clean and renewable energies
One of the core focuses of PROPARCO’s strategy is to finance low-carbon projects. This includes financing renewable energy projects (wind, geothermal, micro-hydro…), as well as projects for energy efficiency, biofuels, biogas and biomass recovery, etc. AFD Group has an in-house tool to measure the carbon footprint of the projects it finances, Bilan Carbone® and to support its strategic decision-making.
MUMIAS Kenya’s first private cogeneration project In April 2008, PROPARCO and AFD allocated a EUR35m loan to Mumias Sugar Company (MSC) for the construction of a new cogeneration power plant. Kenya’s largest sugar producer, Mumias uses sugar cane residue (bagasse) as a fuel to produce electricity. The particularly high level of volatility in Africa’s sugar market prompted MSC to review its production policy and diversify its activities. In 2000, the company installed a first bagasse cogeneration power plant allowing it to operate 15 MW production unit, which made it energy independent. The company now has a production surplus and has been selling electricity to the domestic grid since 2005. The financing for the new cogeneration plant increases MSC’s power generation capacity and therefore its sales.
This strategy initially focused on developing and least developed countries, has gradually been extended to all emerging countries. PROPARCO’s action helps increase the energy independence of the countries where it works, while contributing to the fight against climate change. In 2010, PROPARCO financed 17 projects in this sector totaling EUR375m. This proactive policy supports promoters of innovative projects in countries with high potential of renewable energy generation. PROPARCO, through the partnership it has built with CDC Climat in 2011, has extended its range of financing by investing in carbon credit purchases. This activity will allow a large number of projects, located mainly in the Mediterranean and Sub-Saharan Africa, to come into operation and these two regions to benefit from additional resources.
The project allows the company to diversify its income and exploit a bagasse surplus that is currently unused. MSC has a generation capacity of 34 MW, of which 8 MW make its energy independent, and the remaining 26 MW are sold on the domestic market. The project raises Kenya’s energy capacity by developing renewable energies and helps reducing CO2 emissions. It also provides MSC with validated carbon credits which are sold to a Japanese company. Finally, it helps increasing the income of sugar planters who receive 10% of the value of the electricity sold.
THEUN-HINBOUN Providing 200 000 people with easier access to electricity in Southeast Asia In 2009, PROPARCO allocated a US$40m senior loan to Theun Hinboun Power Company (THPC) to raise the capacity of the Theun-Hinboun Dam in Lao PDR. The aim of this investment is to finance the construction of a new 70-metre high dam and install a 60 MW power plant at the foot of the dam. It also plans to double the capacity of the existing power plant and thus raise its generation capacity to 440 MW by 2012. The total project cost stands at US$733m, with US$123m self-financed by THPC and US$610m by long-term debt. PROPARCO is in charge of coordinating its European financing
partners’ (the Netherlands’ FMO and Germany’s DEG), for a debt which amounts to US$113m. The debt has been raised with an equal share of dollars and Thai baht to allow THPC to benefit from natural exchange risk hedging. This means the debt can be matched with the profile of the project revenues. The Theun-Hinboun project is essential for Lao PDR’s development strategy. It allows its energy supply sources to be diversified at a competitive price (US$0.052/kWh) and gives 200 000 people easier access to electricity. It also helps reducing greenhouse gas emissions by 775 000 Teq CO2 a year and makes an annual US$40m contribution to State revenues through taxes.
Our resources A team and a network PROPARCO has a team with a wide range of skills and experience completely dedicated to infrastructure projects. In this field, it is represented by a worldwide network of 12 regional offices and benefits from the support of AFD’s 71 agencies.
Products tailored to energy project financing PROPARCO has a full range of financial products that allows it to provide an effective response to the specific needs of investors and borrowers. • Medium and long-term loans ranging between EUR5m and EUR100m with maturities of 5 to 20 years, • Loan guarantees or bonds in local currency, • Equity or quasi-equity investments for transactions of between EUR2m and EUR10m over a period of between 5 and 7 years, including the development phase for projects in Africa thanks to the Investment and Support Fund for Businesses in Africa (FISEA).
Member of partner network PROPARCO works with an extensive network of European and global partners that goes from development finance institutions (DFIs) to
EURUS The largest wind project ever implemented in Latin America In 2009, PROPARCO allocated a US$35m loan to EURUS, the local subsidiary of Acciona, a reference player in wind infrastructure development, for the construction and operation of a 250.5 MW wind farm in Mexico.
export-credit agencies and commercial banks. Strong ties have been built with the IFC (International Finance Corporation), the Netherlands’ FMO, the Germany’s DEG, the EIB (European Investment Bank) and the ADB (African Development Bank).
It is the largest wind project ever implemented in Latin America for a total cost of US$607m. It is also the largest loan ever allocated in Latin America for renewable energy infrastructure developed under a private concession. The project is located in Southwest Mexico, a region with some of the highest wind power potential in the world. Power is produced at a competitive price thanks to the exceptionally high level of wind energy. This project is in line with the Mexican State policy to promote renewable energies and is expected to reduce greenhouse gas emissions by 600 000 Teq CO2 a year. It generates the equivalent in carbon credits, which helps ensuring it’s financially sound. Finally, the project will create over 1 000 direct and indirect jobs.
PROPARCO is a development finance institution jointly owned by Agence Française de Développement and public and private shareholders from both the North and the South. Founded in 1977 on the conviction that the private sector is a key player in the development of Southern countries, PROPARCO’s mission is to invest and catalyze private investments in those countries. Its actions aim to support growth and job creation, sustainable development and the achievement of the Millennium Development Goals. With a business area covering four continents, PROPARCO plays a countercyclical role by investing in regions, sectors and projects that are generally seen as being too risky by commercial banks. Demanding a high level of environmental and social responsibility, PROPARCO supports the development of businesses, banks, Photos credits: PROPARCO – Graphic design: Vincent Collin
sustainable infrastructure and the fight against climate change. The projects financed by PROPARCO are selected on the basis of their economic viability, their financial profitability and their impact on the development of populations and the countries it supports. PROPARCO helps its clients over time by offering a full range of medium and long-term financial products (loans, guarantees and equity), meeting the specific needs of private sector in Southern countries.
151, rue Saint-Honoré 75001 Paris – France Tel.: (33) 1 53 44 31 08 Fax: (33) 1 53 44 38 38
www.proparco.fr Contact: Jean-Pierre Barral Head of the Infrastructure and Mining Division _INFRAPRO@afd.fr