CDC backs African renewable energy fund with US$20m investment

CDC, the UK’s development finance institution, has announced a new US$20 million investment to boost the development of renewable energy in sub-Saharan Africa.

CDC’s commitment to the Africa Renewable Energy Fund (AREF) will make long-term capital available for greenfield renewable energy infrastructure projects.

CDC’s capital will be used by the fund to invest across the renewable sector, primarily targeting small hydro, wind, solar and geothermal and biomass companies. AREF, which is managed by Berkeley Energy, is one of the first pan-African private equity funds focused on developing renewable energy infrastructure and is seeking to attract up to US$200 million from investors.

The fund will aim to make investments between US$10 million and US$30 million into 10-50 MW power projects and expects to build a total of 200-250 MW capacity in sub-Saharan Africa where two thirds of the population remain without access to electricity. According to the International Energy Agency (IEA), average electricity consumption per person in the region is too low to keep a single 50-watt light bulb continuously lit.

Welcoming the announcement, Dolika Banda, CDC’s Regional Director, Africa said:

“For countries across Africa, expanding electricity access is critical in their efforts to reduce poverty and boost economic growth. This requires a major increase in power supply to the region and renewable energy has a vital role to play. Yet despite significant, untapped renewable energy resources, sub-Saharan Africa continues to trail the rest of the world in obtaining funds for renewable energy projects."

"AREF is playing a leading role in developing the nascent renewable energy sector in Africa and CDC’s investment can support this development and attract more capital to the sector.”

AREF will identify projects at the pre-construction stage, develop them, oversee construction, bring the projects to financial closure and see them through commissioning and operating stages. The fund is assessing a number of investment opportunities including a geothermal project in Ethiopia, hydro projects in Uganda and Sierra Leone and wind power businesses in West Africa.