Investment & Finance
Empower partners Norfund & CFM on Africa’s largest C&I solar transaction
Norwegian company closes USD 74 million equity deal to finance solar energy for commercial and industrial off-takers.
Last week, at the Africa Renewables Investment Summit (ARIS) that took place in Cape Town, South Africa, the Norwegian solar development and investment company Empower New Energy (Empower) signed a landmark agreement to raise USD 74 million from a consortium led by Climate Fund Managers (CFM), manager of Climate Investor One (CIO).
The partnership plans to develop, finance, own and operate an initial 150 MW of solar projects in Africa over the next three years. This milestone will see Empower become one of the leading renewable investment platform companies serving the Commercial and Industrial (C & I) market in Empowers’ target markets in Africa.
“This new investment capital will enable Empower and our project partners to solarize more than 50 African companies, reducing electricity costs and CO2 emissions and creating thousands of local jobs. This is the largest single capital raise in Africa’s solar C & I (Commercial and Industrial) market so far”, said Terje Osmundsen, Founder and CEO of Empower New Energy.
At the signing, Andrew Johnstone, CEO of Climate Fund Managers, said; “Over the past few years, Empower has built a unique and scalable investment model for Africa’s C & I market that fits well with the business philosophy of Climate Fund Managers. We are confident that this transaction lays a solid foundation for building a leader in the African renewable energy market”.
Empower New Energy is a solar platform investment company that raised its first capital of USD 7.9 million in 2019 from ElectriFi, Norfund and 12 private investors. The company has so far carried out eight solar investments for industrial and agricultural off-takers in Egypt, Ghana and Nigeria and has signed contracts worth more than USD 30 million with other off-takers in Egypt, Morocco, Ghana and Nigeria.
“As an early investor in Empower New Energy, we have been delighted to see how the company has already provided companies with clean, reliable and affordable solar energy that help cut both costs and emissions. We look forward to continue our partnership in contributing to sustainable growth in the commercial and industrial sector in Africa in the years to come, says Anders Blom, Vice President Clean Energy in Norfund”.
Munyaradzi Jani, Executive Director at RenewAfrica.Biz commented on the signing saying;”We are honoured that the Empower and its partners chose ARIS as platform for this momentous signing for a fund that will help transform the businesses in Africa through solar energy. ARIS is a great platform to conclude deals in renewable energy, and we encourage more investors to invest in Africa’s renewable energy sector.”
Norfund is investing USD 12,5 million in this capital raise. In addition, the investor consortium is joined by Janeiro Energy AS, an investment company partly owned by Svein Harald Øygard, a profiled Norwegian economist and investor.
Africa is estimated to have about 60% of the world’s solar resources but has only received about 1% of the world’s installed solar capacity. In 2021, Africa’s share of total investments in renewables fell to below 1%. The largest barrier to realizing renewable projects in Africa is high capital costs. The International Energy Agency has estimated that the capital costs of investing in clean energy in sub-Saharan Africa can be more than five times higher than in the USA and Europe. In addition, renewable energy projects are generally smaller in Africa than in other parts of the world, resulting in prohibitively high transaction costs.
Empower’s platform investment model helps spread the risk across multiple off takers and countries and to keep transaction costs low. Financing costs are reduced by
raising debt at portfolio level. “In large parts of Africa, companies tend to pay 25-50% more for electricity than elsewhere in the world. As a result of our investment in on-site solar power production, often including batteries, our off-take partners can reduce electricity costs by 15-20% or more”, says Osmundsen.
Empower’s impact investment platform has been developed with support from Norad (the Norwegian development agency) as well as the Sustainable Energy Fund for Africa (SEFA), a fund managed by AfDB (African Development Bank).
In addition to the equity capital, the consortium will aim to raise debt, enabling Empower to invest a minimum of USD 100 million over the next three years. This will enable the company to develop, build, own and operate more than 150 MW of solar projects (including batteries) for commercial and industrial users in Africa, avoiding 200,000 tons of CO2 and generating more than 240 GWh of competitively priced solar PV electricity on an annual basis, and creating or protecting approximately 15,000 jobs. Furthermore, Empower and its investors have agreed to earmark 1% of the revenues generated by the projects for a community development programme, focused on projects that can deliver high impact in socially disadvantaged communities in targeted markets.
Facts about Climate Fund Managers (CFM) / Climate Investor One (CI1)
· CFM is a leading blended finance fund manager dedicated to securing a sustainable future through investing across global emerging markets. CFM has a long-term vision to structure cutting edge financing facilities around thematic areas of climate change mitigation and adaptation, including renewable energy, water and oceans, sustainable land use and sustainable cities. CFM is established as a joint venture between the Dutch development bank FMO and Sanlam InfraWorks – part of the Sanlam Group of South Africa
· Climate Investor One (CI1) is the inaugural facility managed by CFM, focused on providing capital to renewable energy projects in developing countries. CI1 has a focus on Africa, South & Southeast Asia, and Latin America, and uses a whole-of-life financing approach intended to reduce implementation timelines. The facility also enjoys support from the EU through its External Investment Plan, a part of its wider commitment to sustainable development and climate change mitigation, as well as cornerstone support from the Ministry of Foreign Affairs of the Netherlands, the Nordic Development Fund (NDF) and USAID’s Power Africa program.
Facts about Norfund
Norfund is the Norwegian Investment Fund for developing countries. Our mission is to create jobs and to improve lives by investing in businesses that drive sustainable development. Norfund is owned and funded by the Norwegian Government and is the Government’s most important tool for strengthening the private sector in developing countries, and for reducing poverty.
Norfund’s committed portfolio totals 3.1 billion USD in Sub-Saharan Africa, South-East Asia, and Central America. Norfund has four investment areas: Clean Energy, Financial Institutions, Scalable Enterprises and Green Infrastructure.
Facts about Empower New Energy
Established in 2017, Empower New Energy is an award-winning renewable energy and investment company with a proven business and operating model, focusing on the commercial and industrial sector in Africa. Since the launch of its investment fund in 2019, Empower has built a portfolio of eight solar plants totalling around 5,5 MW serving commercial and industrial off takers in Egypt, Ghana and Nigeria. It has developed a pipeline of more than 150 MW, mainly in North and West Africa. The company employs 13 people from eight different nationalities working from Oslo, London, Accra, Lagos, Tunis and Australia. More than 50% of Empower’s employees are women.
Empower’s key value proposition is to mobilize and provide access to capital for the development of clean energy projects, and to generate financial returns for its investors. It achieves this by bundling investments and leveraging them with debt, before ultimately selling de-risked assets on to long-term investors.
Through its first eight investments, Empower has invested in solar plants that deliver clean energy to, amongst others:
– Miniplast: a plastic recycling and manufacturing plant in Accra, Ghana
– Premium Poultry: Nigeria’s largest poultry farm.
– Inter-Cairo Aluminium: an aluminium manufacturing plant in Cairo, Egypt.
– Cairo Metals: commercial trader of all raw steel materials in Nasr, Egypt.
– AMECO: a medical equipment supplies manufacturing company in Cairo, Egypt
– Barry Callebaut: a renowned chocolate manufacturing company in Ghana.
– Smart Paper: a manufacturing company of recycled paper flute packaging in Egypt.
– Ghana Nuts: a large-scale manufacturer of an affordable, high-protein soya meal for livestock.
Empower’s business model is based on partnerships with local project developers, securing a large deal-flow, and risk mitigation. Once projects have been developed, de-risked, subjected to full due diligence, and approved by the company’s governing bodies, Empower offers construction equity finance. Empower then manages the assets from that point on and receives revenues for energy generated. The projects are based on 10-20 years of sales contracts with the end customer, who are usually industrial companies, commercial entities (e.g., in the retail sector), or providers of community services (such as universities or hospitals).
For the off-take partners, Empower’s model offers several benefits, including:
· Reduced costs of electricity from day one, with no up-front payment
· Verified reductions in CO2 emissions, and improved environmental performance
· Complete monitoring and maintenance, which eliminates performance risks
· Scalability to allow the inclusion of battery storage, for enhanced reliability and solar power supply during evenings and nights