CrossBoundary’s Energy Fund gets $40M & delivers 15% IRR to investors

Cape Town – The first of CrossBoundary’s Energy Fund exited last week delivering a 15% net IRR to investors. The company also raised $40M in new equity funding from ARCH Emerging Markets Partners’ Africa Renewable Power Fund (ARCH ARPF). The funding is to exit initial investors and support CrossBoundary Energy to continue to develop, construct and operate distributed commercial & industrial (C&I) solar projects in Africa. The company hailed the exit and the injection of new funding as a powerful endorsement for the role of distributed renewables in Africa and the potential of blended finance in unlocking new asset classes.

“We’re very excited to work with ARCH ARPF to continue providing Africa’s leading businesses with cheaper, cleaner, more reliable power at no upfront cost” said Pieter Joubert, Chief Investment Officer, CrossBoundary Energy.

CrossBoundary’s solar as a service model

CrossBoundary Energy was launched in 2015 as an investment platform for C&I solar assets in Sub-Saharan Africa. The company is currently operating and delivering around $57M worth of assets, serving 20 customers across 8 countries in Africa, including more than 40MW of fully financed solar PV and 10 MWh of battery storage projects. CrossBoundary Energy’s solar-as-a-service model allows corporate customers to avoid the upfront capital expenditure and technical risk that can be a barrier to solar adoption. Instead, customers enter into long-term solar service agreements under which CrossBoundary Energy (in partnership with local developers and solar contractors) finances, installs and operates solar assets to provide customers with cleaner and cheaper power.

The partnership with ARCH Emerging Markets Partners

“Partnering with an industry-leading investor like ARCH ARPF highlights the proven viability of captive commercial and industrial solar projects in Africa. This commitment by ARCH ARPF represents the next phase of a larger $100M transaction which will allow us to take the C&I sector to scale across Africa, and in doing so, further reduce energy costs for our customers, create additional jobs within the solar sector, and significantly reduce carbon emissions,” said Pieter Joubert, Chief Investment Officer, CrossBoundary Energy.

ARCH ARPF is a dedicated African renewable energy fund whose mission is to create long term value for its stakeholders while addressing the African market’s growing demand for bankable, de-risked electricity generation.

The viability of blended finance in an African context

The exit of CrossBoundary Energy I (CBE1) is also a powerful demonstration of the potential of blended finance to unlock new and impactful asset classes. CBE1 was closed in November 2015 as Africa’s first dedicated fund for C&I solar. It was also a prototype for a new blended finance approach to renewables in Africa. USAID’s Power Africa initiative contributed $1.3M in the form of a repayable grant to catalyse private investors into the fund. USAID’s subordinated equity contribution attracted additional equity investors, effectively resulting in leverage of matching private capital of more than 6.0x. At the close of this transaction, this leverage increased to more than 30x and USAID’s blended finance

contribution of $1.3M has now been repaid to the US Treasury with a return of 5%. CBE1 also benefited from grant support from OPIC (now the US International Development Finance Corporation) and the Shell Foundation, in partnership with the UK’s Foreign, Commonwealth & Development Office. This support allowed the fund to expand its operations across Africa.