African Renewable Energy Fund (AREF) launches with $100m committed capital

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The African Renewable Energy Fund (AREF), a dedicated renewable energy fund focused on Sub-Saharan Africa closed on Wednesday, March 12, 2014 with US $100 million of committed capital to support small- to medium-scale independent power producers (IPPs).

The fund, which will be headquartered in Nairobi, is targeting a final close of US $200 million within the next 12 months to be invested in grid-connected development stage renewable energy projects including small hydro, wind, geothermal, solar, biomass and waste gas.

Initially promoted in a joint initiative by the African Biofuel and Renewable Energy Company (ABREC) and the African Development Bank (AfDB), AREF will be managed by Berkeley Energy Africa Limited (Berkeley Energy), a fund manager focused on developing and investing in renewable energy projects in emerging markets. The fund will target IPPs with an ideal size of between 5 and 50 MW and a commitment per project of between US $10 million and US $30 million, with the capacity to source further funding from co-investors where necessary for a larger investment.

Africa Development Bank is the fund’s lead sponsor, bringing US $65 million in an equity investment package from its statutory resources as well as climate finance instruments such as Sustainable Energy for Africa (SEFA) and the Global Environment Facility (GEF)to leverage commercial and institutional investment. SEFA will additionally fund a Project Support Facility (PSF), which will provide resources to be deployed at an early stage to structure bankable deals.

“Over the past decade, the AfDB has established itself as a prime catalyst for renewable energy investment on the continent and is currently hosting the Africa Hub for the Sustainable Energy for All (SE4All) initiative. As Africa’s largest infrastructure finance partner, we understand the value of supporting both large-scale and small-scale projects as part of our strategy for Africa to promote inclusive and sustainable growth,” said Gabriel Negatu, AfDB Regional Director for the East Africa Regional Resource Center.

The investor group also includes West African Development Bank (BOAD), Ecowas Bank for Investment and Development (EBID), Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V. (FMO), Calvert Foundation, Berkeley Energy and ABREC, who are the vision-bearers of the fund.

Owned by 15 African Nations and five financial institutions, ABREC is a company specialized in developing, managing and advising public and private sector renewable energy and energy efficiency initiatives and projects.

ABREC’s CEO and Chairman Thierno Bocar Tall said, “ABREC is proud to have its vision of an African renewable energy fund become reality. This initiative, on which AfDB, Berkeley Energy and ABREC have worked closely together, is a significant milestone for realizing the potential of renewable energy in Sub-Saharan markets. AREF, as a private sector investment initiative, is a key component of ABREC’s strategy that includes investment, development and advisory activities in relation with renewable energy projects across Africa.”

AfDB selected Berkeley Energy as the fund manager of AREF following a competitive procedure. Berkeley Energy, based in Mauritius, will have operational headquarters in Nairobi and a further office to be situated in West Africa. The Berkeley Energy team and investment committee comprises Managing Partner TC Kundi; Partner Alastair Vere Nicoll; Chairman Andrew Reicher; Investment Director and AREF lead Luka Buljan; and Investment Committee members Thierno Bocar Tall, Chief Executive Officer of ABREC; and Eddie Njoroge, former Chief Executive Officer of Kenya Electricity Generating Company (Kengen).

Berkeley Energy’s Managing Partner TC Kundi said, “We are extremely pleased to have been entrusted this mandate by the AfDB and the other catalytic investors in the first close of AREF. The launch of a first pan-African dedicated renewable energy fund, with a centre of gravity in Africa, sourcing a majority of its capital from Africa at an exciting time in the evolution of macro-economic factors in Africa’s favour, presents a propitious environment for the investment of AREF. We aim to use Berkeley Energy’s technical and financial experience to ensure that a part of Africa’s growing need for power is met through responsibly developed clean energy projects that improve the generation mix and maximize the use of local resources”.

FMO’s CEO Nanno Kleiterp said, “FMO is proud to be a first close investor in the Africa Renewable Energy Fund and delighted to see that the Fund has achieved First Close at $100 million. This milestone means that more risk capital is available for renewable energy projects in Sub-Saharan Africa, which is fully in line with FMO’s investment strategy. FMO has an excellent relationship with Berkeley Energy, the AREF Fund Manager, through our investment in Berkeley’s Renewable Energy Asia Fund. We believe Berkeley is well placed to play a leading role in further developing the nascent, but vibrant renewable energy sector in Africa. We are also impressed with the leading role the African Development Bank played in promoting the Fund, which brings together private and public investors from Africa, the United States and Europe in an exciting First Close.”

For Bassary Touré, Vice-Chairman of BOAD, “Populations’ access to clean and renewable energy sources is one of the key objectives set by BOAD. Hence, this equity investment in AREF’s capital will help increase BOAD’s action in the area.”

EBID Director for Private Sector Operations Ousmane Bocoum said, “The investment and development bank of the CEDEAO (BIDC) is the financial arm of the CEDEAO. In fact, the Africa Renewable Energy Fund (AREF) initially was a joint initiative of the CNUCED and BIDC, who together decided to create an instrument exclusively dedicated to the financing of energy renewable projects. That initiative, through the African Biofuel Renewable Energy Company (ABREC) and the AfDB, led to the establishment of the African Renewable Energy Fund, which we are now proceeding to launch. It is therefore as the initiator of this great idea that BIDC is very happy to see the conclusion of this project and delighted to participate in the launch event today. Full of hope for the future of our fund, we wish the AREF team the very best. We are certain that Berkeley Energy, our manager, will know how to overcome all the challenges.”