Norfund and UKCI are funding a South African joint venture partnership between H1 Holdings and Pele Green Energy to develop wind power assets in South Africa.

Norfund and Macquarie-managed UK Climate Investments (UKCI) are financing a joint venture between H1 Holdings and Pele Green Energy to fund their 40% equity participation in a 700 MW portfolio of onshore wind farms. Both partners will invest alongside Enel Green Power in one of South Africa’s largest renewable energy equity deals valued at around $US100 million.

Increased access to clean, reliable, and affordable energy is a critical enabler of social and economic development, and the investment will aim to accelerate South Africa’s transition to a low carbon economy.

Avoiding 2,2 million tons of CO2-emissions

The projects will contribute to avoid an average of 2.2 million tonnes of CO2 emissions annually, or 43.8 million tonnes over the lifetime of the projects, when estimated with the IFI approach “GHG Accounting for Grid Connected Renewable Energy Projects. That is equivalent to the emissions of half of the total number of cars in Norway.

The investment will also have a strong emphasis on enhancing Black Economic Empowerment (BEE), and the portfolio will make annual social investments in host communities which have historically been disadvantaged. These BEE investments will strengthen the joint venture partners as leading Independent Power Producers (IPPs).

Macquarie and Enel are founding private sector members of CFLI, and Norfund has been a leading participant among the European Development Finance Institutions who have been working with CFLI members on partnering together in emerging and developing markets.

H1 Holdings is renowned for its fundraising abilities, thus fulfilling a crucial element of the global requirement to increase funding for renewable energy and climate action. Pele Green Energy, which will assume a more operational role across the portfolio, will bring technical expertise given their unique position as one of the few South African IPPs that controls and operates a utility-scale power plant.

Enel Green Power, who will retain a 60% ownership interest in the portfolio, has a proven track record of successfully delivering renewable energy projects in South Africa, as well as other markets.

A new partnership between Norfund, CDC Group, Finnfund and New Forests aims to raise up to $500 million over the next three to five years in the fight against climate change. 

Africa is home to around 17 per cent of the world’s forests, including 20 per cent of all tropical forests. These vital ecosystems are under pressure from biodiversity loss and deforestation, as the continent faces a growing wood products shortage as economies and populations grow.

Increasing the sustainability of timber production and improving forestry and landscape management practices is critical in combatting climate change and creating nature-positive outcomes in the region.

The new partnership will aim to provide much-needed capital to:

• support the development and effective management of sustainable forestry practices, including conservation of remaining natural forests.
• responsibly expand productive forest plantations, community forests and forest restoration projects across the region.
• facilitate development of nature-based climate solutions that will help prevent forest loss and preserve Africa’s natural capital.
• Accelerate the creation of green jobs, improve livelihoods, and generate sustainable and inclusive economic development in rural communities across sub-Saharan Africa.

The partnership builds on each organisation’s existing commitments to responsible forestry, bringing together CDC, Finnfund and Norfund’s expertise in investing for development in Africa, with New Forests’ track record in scaling investment and climate finance in forestry into new geographic and market segments.

New 1.2 billion USD climate investment mandate

The Norwegian government has proposed to allocate 1.2 billion USD over five years to a new climate investment fund managed by Norfund that will invest in renewable energy in developing countries with the aim of contributing to reduced greenhouse gas emissions.

A final decision on the first allocation of 240 million USD for 2022 is expected this autumn. The fund will give Norfund increased possibilities to step up our energy investments in the coming years.

Norfund is investing €10 million in equity in Baobab+, the leading distributor of solar home systems in Western Africa and Madagascar.

Baobab+, a panafrican group already present in Côte d’Ivoire, Mali, Senegal and Madagascar, has equipped 220,000 households and served more than 1,200,000 beneficiaries in the past 5 years.

This funding will allow the company to strengthen its presence in its existing countries and deploy operations in Nigeria and the Democratic Republic of Congo.

Baobab+ aims to equip one million households with solar and digital products within 5 years.

Robust growth through the pandemic

The financing from Norfund comes at a time when Baobab+ has demonstrated its robustness despite the Covid-19 pandemic crisis: as of August 2021, Baobab+ had experienced sustained ≈ +60% yearly business growth.

For Baobab+, access to energy is also a springboard to enable every African household to take part in the digital revolution. In the countries where the company operates, Baobab+ has been a pioneer in launching a smartphone offer with flexible payment. In partnership with local start-ups, Baobab+ offers additional content that meets its customers’ needs, such as e-education, health or the management of small business activities. To date, Baobab+ has equipped more than 90,000 households with digital solutions.

Supporting financial inclusion

In addition, in partnership with its parent company, the Baobab microfinance group, a major player in access to financial inclusion in Africa, Baobab+ has developed a unique scoring framework that allows its Pay-As-You-Go clients to become eligible for a nano-credit, using their repayment history from the solar or digital product serving as their first credit experience. This proprietary solution, initially introduced in Senegal, will be gradually deployed in all countries.

Norfund invests 100 million USD in Fourth Partner Energy, a leading developer of distributed solar energy, energy storage and charging infrastructure in India.

Fourth Partner Energy manages a portfolio of 550 MW within distributed solar, and has a target of 3 GW of installed solar capacity by 2025.

The company has established itself as a market leader for distributed solar cell solutions to companies in India, but it has also commenced operations in Sri Lanka, Bangladesh and Vietnam. In Indonesia, Fourth Partner Energy has tied up with integrated energy major Indika Energy to offer solar solutions to corporates there.

In addition to increases in installed solar capacity, Fourth Partner Energy is aiming for expansion of capabilities across energy storage and EV charging infrastructure.

– The investment marks Norfund’s first investment in charging infrastructure. Electrification of transport is now developing fast, and it will be interesting to follow the opportunities that are opening in our markets, says Blom.

Existing shareholder, The Rise Fund, TPG’s global impact investing platform, also invested an additional $25 Mn into Fourth Partner, following its $70 Mn investment in July 2018.

– It is a great honour that the Norwegian Government gives Norfund the responsibility of managing the new Climate Investment Fund, says Tellef Thorleifsson, CEO of Norfund. 

The Norwegian government plans to allocate NOK 10 billion over five years to a new fund that will invest in renewable energy in developing countries with the aim of contributing to reduced greenhouse gas emissions.

One billion NOK from Norfund’s capital and one billion NOK from the state budget will be set aside annually for the fund. 

Need for mobilization of private capital

The IEA said in June that by the end of the 2020s, annual capital spending on clean energy in developing countries needs to increase more than sevenfold, from the current level of USD 150 billion to over USD 1 trillion, to put the world on track to net-zero emissions by 2050. 

– If the world is to succeed, public money must be used in a way that mobilizes private capital. We are experiencing increased interest among private and institutional investors to participate in renewable energy investments. Norfund is familiar with these markets and technologies, and has a proven track record, says Thorleifsson. 

Norfund typically contributes less than 35 per cent of the equity requirements of an energy project, and such projects often finance 70-80 per cent of costs with debt. This means that every dollar Norfund invests can trigger ten dollars of capital in a project. 

Increased investments in South- and Southeast Asia

– We expect that the fund will prioritize investments in India, Vietnam, Indonesia and other countries in South and Southeast Asia, where there is intensive use of coal-fired power. We expect to invest mainly in solar and wind energy, but also anticipate storage solutions to enable a stable power supply, says Thorleifsson. 

Across Asia, Africa and Central America, Norfund has invested in and with companies such as Globeleq, Scatec, Berkeley Energy Commercial and Industrial Solutions, SN Power ENEL and d.Light – which are commercially sound while simultaneously addressing climate change and employment generation. 

– Norfund’s energy investments over the past 20 years have been aimed at reducing poverty but have also made effective contributions to avoiding greenhouse gas emissions. We now have a new and clear mandate to invest more in markets where emission reductions will be greatest, says Thorleifsson. 

Norfund’s investments in new renewable energy since its inception contribute annually to 8 million tonnes of CO2 in avoided greenhouse gas emissions – equivalent to one sixth of Norway’s annual emissions – or all Norwegian passenger cars and heavy vehicles.

The average return from Norfund’s energy investments has been 6.6% (IRR). 

Contributing to phasing out coal

The UN Secretary-General has said that “Phasing out coal from the electricity sector is the single most important step to get in line with the 1.5 degree goal.”

Renewable energy requires larger up-front investment than thermal solutions, and the price of capital is thus often decisive for which alternative is chosen. 

– By entering renewable energy projects at an early phase and providing access to risk capital and expertise in close collaboration with private partners, we have seen that we can make a significant difference, says Thorleifsson. 

Amartha, Indonesia’s major peer-to-peer fintech company that focuses on women empowerment, starts collaboration with Norfund by providing capital to digitize micro-economies across Indonesia.

Amartha has disbursed more than USD 250 mill and empowered 678,502 women across more than 18,900 villages in Jawa, Sumatra, and Sulawesi. During the pandemic, Amartha has continued to improve and become stronger.

Norfund’s 7.5M USD senior loan to Amartha is an initiative to help them provide microcredit to many more female micropreneurs in the bottom of the pyramid and to promote financial inclusion of the unbanked in Indonesia.

In addition to providing capital, Norfund will provide technical assistance and global expertise assisting Amartha to promote global environmental and social standards.

The need for more and better jobs to combat poverty has been exacerbated by the pandemic crisis. Two months ahead of COP26, we are also at a critical juncture to stop the longer-term climate crisis.

At the Norfund Conference 2021 we discussed what must be done to bridge the gaps to protect and create jobs and to enable green growth in developing countries.

Watch the recording here:

Speakers

Relevant pages:

Welcome to Norfund Conference 2021 on the 31st of August from 11.30 – 15.00 (CEST). This virtual conference is free.

Large private investors such as Allianz, AXA, Bloomberg, Enel, Goldman Sachs and Macquarie, and European development finance institutions, including Norfund, plan to co-operate with governments in emerging markets to accelerate the financing of necessary climate investments.

Some of the world’s largest asset managers and development finance institutions launch a joint report that outlines key factors for fostering the public-private collaboration necessary to close the climate finance gap in emerging markets.

The report also highlights policies that governments in emerging markets can advance to attract investment to projects in key areas.

The initiative is organized under The Climate Finance Leadership Initiative (CFLI), the Global Infrastructure Facility and the European Development Finance Institutions.

This report outlines steps emerging markets can take, with support from business and the international community, to attract more private capital for green projects, create new public-private partnerships, and ensure a strong recovery from the pandemic

Michael R. Bloomberg, founder of Bloomberg LP and Bloomberg Philanthropies, and Chair of the CFLI

The Policy Considerations in the report were informed by a two-month public consultative process and direct outreach to over 6,000 global experts and stakeholders representing business, government, and civil society perspectives.

The partnership

The partnership will seek to design, launch, and coordinate a series of “country pilots” in collaboration with local governments, and leading private international and domestic financial institutions, based on the policy considerations in the report.

– By working closely with both large private investors and the authorities in the countries concerned, the capital and expertise that actors such as Norfund offer, can play an even more important role in catalysing more private capital, says Thorleifsson.

Pilots in India and Indonesia

The first pilots are planned for India and Indonesia, with the goal of replicating the model in other countries in the years ahead.

India and Indonesia are both among the countries in the world with the largest planned increase in the use of coal power.

The Italian energy company ENEL is one of the companies behind the initiative. Last summer, Norfund and ENEL signed a long term agreement to develop renewable energy in India.

– We see that the need for capital is enormous in India, and development finance institutions like Norfund who can take greater risk, have a crucial role in mobilizing sufficient capital, and make it possible for the country to base its continued growth out of poverty on renewable energy, says Thorleifsson.

Digital technologies create opportunities for establishment and growth of new businesses and business models in Southeast Asia. In addition to creating jobs and economic growth, these companies will give access to previously unreachable services for rural population.

Southeast Asia is about to becoming one of the world’s fastest-growing arenas for online commerce, according to a Bloomberg report. The majority of the Southeast Asian population is young and technologically mature to adapt to new digital solutions.

Introducing digital services to rural populations

While the spread of the digital economy so far has been uneven, with growth concentrated in the region’s biggest cities, the digital economy is now also reaching smaller cities and rural areas .

This will introduce a large part of the region’s population to services that have been out of reach for them. Examples are online banking, insurance, payments, as well as access to digital marketplaces, digital education content and efficient distribution models of agricultural produce to the final markets.

Openspace Ventures Fund III

Openspace Ventures III is a fund investing in early-stage technology companies in Southeast Asia, with a particular emphasis on Indonesia.

The two founders of Openspace Ventures, Hian Goh and Shane Chesson are experienced and well placed to take advantage of the interesting opportunity that new digital technologies represent, and to offer direct benefit to people in rural areas as well as in cities.

Norfund’s contribution:

In 2020, Norfund committed 128 MNOK to the fund. Through this partnership, Norfund will be able to support many more early-stage technology companies than we could do alone. As a development finance institution Norfund will contribute actively to increase the ESG expertise within the Openspace investment teams and help them implement routines in accordance with the IFC Performance Standards within their own company as well as within their investees.

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