Mobilizing Private Sector

Finance

Expert Meeting on Climate Change & Enhanced Renewable Energy Deployment

29th February to 1st March 2016 -Dakar, Senegal

Things to Cover

1. Set the Context

2. Actual Investments vs. Future Needs

3. The Role of the Public Sector

4. The Expectations of the Private Sector

5. Risks and Barriers

6. Financial Instruments and Sources

645 million Africanshave no access to electricity

40%implied electrification rate in the continent

USD 22.5 billion2015 Investments in the energy sector

USD 55 billionInvestment needed per year

USD 300 billionTotal required from the Private Sector

Main Investor in Power

Infrastructure

Capacity

Impediments

Regulatory

Impediments

Others

Financial

Impediments

Public Sector

What is Central to Private

Sector Investments

1. Private Investment decisions are based on project’s commercial viability

2. Proper enabling environment is crucial

3. Leverage their equity

Financial Instruments can contribute to

mitigate a myriad of risks and enhance

private investments

Grants

Sovereign Bonds

Debt

Guarantees

Equity

Return

Ris

k

Debt

Concessional Debt

Subordinated Debt

Senior Debt

Insurance

Partial Risk

Guarantees

Partial Credit

Guarantees

First-Loss

Guarantees

Second-Loss

Guarantees

Commercial

Insurance

Equity

Early Equity

Long-term Equity

Junior Equity

Mezzanine

Grants

Non-reimbursable

grants

Reimbursable grants

Convertible-grants

Bonds

Sovereign Bonds

Corporate Bonds

Other bonds

Source Source Source Source Source

MDBs

DFIs

Creditworthy

Governments

Creditworthy Private

Companies

MDBs

MDBs

DFIs

Commercial Banks

Debt Funds

Commercial Insurers

MDBs

DFIs

MIGA

ECAs

others

Private Equity Funds

MDBs

Project Development

Financiers

Institutional Investors

Some of the Financiers

Successful Examples

Lake Turkana Project

∎ Partial Risk Guarantee(covered government’s performance linked to possible delays in the construction ofauxiliary infrastructure)∎ Subordinated Debt(improved the risk profile of more averse commercial financiers)

Africa Renewable Energy Fund

∎ Reimbursable Grant(to undertake project feasibility pre-investment to mitigate technology risk)∎ Junior Equity(stimulated the participation of other investors in the fund by rewarding theirreturn)

Conclusions

1. There isn’t a ”one solution fits all”

2. Risks can be properly mitigated and

allocated

3. Governments should dedicate more time to

Sector planning and Investment priorities

4. Investor-friendly policies are crucial

Thank You

Contacts

Leandro Azevedo

Climate Finance

Officer – AfDB

l.azevedo@afdb.org