NDF - Financing for climate change and development projects

NDF commits new financing for high-performing clean energy producer rAREH in Sub-Saharan Africa

Photo: rAREH
Rwada hydrostation
17.01.2020

NDF’s Board of Directors has approved additional equity financing of EUR 10 million for responsAbility Renewable Energy Holding

The private equity fund responsAbility Renewable Energy Holding Company (rAREH) is set to receive a further EUR 10 million in shareholder equity from NDF. This new financing follows on from an initial investment in 2017 of EUR 7.5 million, of which EUR 7 million was equity and the remaining EUR 500,000 for Technical Assistance.

This second capital round, which reached USD 48 million, will strengthen rAREH’s total capital base to around USD 122 million, and is being made jointly with shareholders Norfund, KfW and responsAbility, raising NDF’s ownership to approximately 16%.

Bringing affordable green energy to rural communities
From the outset, rAREH's mission has been to increase the supply of clean energy in Sub-Saharan Africa at a reasonable price, and in a responsible way, while creating long-term, stable cash flow across a diversified portfolio. In achieving this goal, rAREH’s approach has been to develop, own and operate small- to medium-sized clean energy plants. The potential of smaller-scale projects in renewable energy is vast in this region as they are easier to develop and manage, have less environmental burden, and can make a significant contribution to much-needed rural electricity without overloading the grid. 

Strong pipeline of viable projects
Despite being new to the market, rAREH has already proven its capacity to develop and manage projects well, while establishing itself as a key strategic actor in the African renewable energy sector. Since 2017, when NDF joined, rAREH has built a strong pipeline of high-quality projects, 70% hydro and 30% solar, all at various stages of development. Given that many of these cannot be fully financed without raising new capital, it was considered in the best interest of existing shareholders to continue supporting rAREH’s ongoing portfolio development.

“There is a clear goal for NDF in providing additional financing to rAREH now,” says Mats Slotte, NDF’s Financial Administration Manager. “The company is still in its early development phase and has significant unrealized potential to further deliver on its goals.”

Clear and relevant need in line with NDF mandate
According to a recent World Bank study, the speed of electrification in Africa is failing to keep pace with rapid population rise. Without more sustained action, a projected 0.65 billion people will still be left without access to electricity by 2030, and nine out of 10 of them will be living in Sub-Saharan Africa.

“This investment is uniquely targeted toward NDF and rAREH’s shared goals for climate and the SDGs,” adds Slotte, “bringing access to reliable clean energy, reducing greenhouse gas emissions, mobilising green capital and empowering local communities – not to mention a possible return on investment to finance more projects in NDF’s future pipeline.”

Written by Laurel Colless

More information:
responsAbility Renewable Energy Holding Company (rAREH) [NDF C99]