US agency announces new loan for solar energy investments in Africa

OPIC said it has approved a $15 million loan to a new investment vehicle managed by solar energy finance business, SunFunder Inc, “that will provide financing to companies operating in developing countries that manufacture, distribute and install solar lighting and energy systems”.

OPIC said SunFunder, which has bases in San Francisco and Tanzania, “will provide receivables financing, project financing, and inventory/working capital loans to the manufacturers, distributors, installers and retailers that provide solar energy” in developing countries including Tanzania, Kenya, Rwanda, Ethiopia, Zambia, Uganda and Ghana.

“The types of solar products will range from portable solar powered lamps to 200 watt solar home systems to 500 kilowatt diesel replacement systems,” OPIC said. “The social impact of having bright, durable and safe energy will enable businesses to stay open longer and allow children to study at night.”

OPIC said the project uses its ‘Innovative Financial Intermediaries Program’, “which focuses on smaller investment funds that apply innovative approaches to address specific development challenges”.

SunFunder’s founder and chief executive officer Ryan Levinson said: “To support solar’s growth in emerging markets, access to sector-specific financing is key. OPIC’s investment in SunFunder's ‘Beyond The Grid Solar Fund’ will help expand our ability to respond to the financing gap that exists for off-grid and grid-deficit solar. Getting this kind of support and validation from OPIC will open up more opportunities not only for solar enterprises but also for investors worldwide.”

OPIC’s loan is the latest round of US-led financing to boost support for a range of Africa-based initiatives aimed at expanding development of the continent’s power infrastructure and supporting the region’s entrepreneurs.

Last July, a package of measures announced during US president Barack Obama’s visit to Kenya and Ethiopia included an extra $1 billion commitment to the US-led Power Africa initiative up to 2018.

According to the director-general of the International Renewable Energy Agency, Adnan Amin, there is “a huge appetite for investment in renewable energy projects in Africa”.

Amin said investment opportunities in the sector in Africa are “plentiful”. However, he said African governments needed to “reduce risks” by ensuring regulatory frameworks and investment incentive schemes were put in place.

According to the World Bank’s International Finance Corporation (IFC), "solar power has enormous potential as an energy source in sub-Saharan Africa, where two thirds of the population lacks access to electricity and grid-based power generation capacity is far short of what is needed".

The IFC said the cost of solar photovoltaic (PV) technology "has fallen dramatically... solar PV can now deliver power at less than 15 US cents per kilowatt hour (US¢/kWh) with long-term price certainty, compared to more than 25 US¢/kWh for diesel fired power that is also subject to volatility with global oil markets".

Professional services firm PwC said in a report published in 2014 that long-term investors, including pension funds and wealth managers, were becoming increasingly involved in the equity and debt of wind and solar projects. PwC’s ‘Low Carbon Economy Index Report’ (20-page / 1.06 MB PDF) said falling costs, especially in solar, have triggered a withdrawal of subsidies from governments, but "institutional investors have filled the space".