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

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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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Ms. Berhane Demissie is co-founder and Managing Partner of one of Ethiopia’s first private equity funds, Cepheus Growth Capital Fund. Born in Ethiopia, she is one of few African female leaders within the finance sector.

With significant international fund management experience, strong knowledge of the local investment environment and extensive local networks, she aims to provide much-needed growth capital to Ethiopian companies.

Cepheus Growth Capital Fund targets export-oriented and import-substituting small- and medium-sized enterprises, mainly within manufacturing, agro-processing and services.

Critically important to have more female leaders in Ethiopia

Ethiopia is a low-income country with more than 100 million people. Over the past 15 years Ethiopia has registered impressive double-digit economic growth rates, largely driven by public sector investments.

However, Ethiopia is among the world’s most challenging markets to operate in. The Covid-19 pandemic and the recent internal conflicts have made the markets even more challenging.

Women remain significantly underrepresented in finance and the private sector.

Studies show that where women are part of diverse leadership teams, financial returns increase and that risk management significantly improves, creating sustainable institutions in the long term.

Demissie emphasizes that it is critically important to have women leaders in the industry to bring diversity in perspectives and decision making.

Norfund addresses gender equality

Norfund made its first investment in Cepheus Growth Capital Fund together with the British Development Finance Institution, CDC and the European Investment Bank in 2018.  Norfund’s aim is to promote access to capital and business competence, as well as creating a large number of jobs, for men and for women.

Norfund is committed to addressing gender equality in our own organization, in our investments, and through Business Support.

Cepheus’ portfolio as of today

Cepheus has so far made two investments in Ethiopia, providing much-needed equity and active ownership resources that will enable the companies to grow and reach their strategic targets. The portfolio consist of a Ceramics manufacturer and an FMCG manufacturer, both in the processes of increasing production capacity by expanding and upgrading its manufacturing lines. Cepheus is an active partner to its investees, providing input on operations, corporate governance and ESG.

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By investing in The National Development Bank in Sri Lanka, Norfund aims to contribute to increased access to capital for SMEs and the unbanked in a country hard hit by Covid-19.

Sri Lanka is a lower middle-income country with a total population of 21.8 million.

Low usage of formal financial institutions

During the period 2010-2019, the Sri Lankan economy grew at an average 5.3 percent. Although a large number of adults have bank accounts, only 29 percent of adults in Sri Lanka have savings at formal financial institutions and just 17 percent have loans.

The COVID-19 crisis is believed to have triggered sharp jobs and earnings losses, and informal workers, about 70 percent of the workforce, are particularly vulnerable.

Serving millions of Sri Lankans with financial services

National Development Bank PLC (NDB) is a premier bank with 113 branches and over 150 ATMs and CRMs across the island, serving millions of Sri Lankans through a host of financial services.

During the COVID-19 pandemic, NDB has been in the forefront of efforts to ensure the resilience of the MSME sector and supporting the economic revival of the country.

Norfund to invest up to 9,99% in the bank

Today, NDB and Norfund announced that they have reached an agreement for Norfund to invest up to 9.99% in National Development Bank.

This is the first foreign equity placement agreement for NDB bank, and the investment will increase its foreign shareholding percentage to around 21%.

The investment comes at a time when international rating agencies have downgraded Sri Lanka’s credit rating. This shows that Norfund endorses NDB’s resilience in a challenging environment and alignment to international standards.

Under this agreement, Norfund will participate in the Rights Issue that NDB has already announced by way of subscribing to unsubscribed rights and also by way of a private placement if required. This investment is subject to other conditions, including regulator and shareholders approvals.

In addition to investing equity capital, Norfund will provide technical assistance and global expertise assisting the bank to promote global environmental and social standards, and to achieve best in class corporate governance.

For Norfund, this is the first equity investment in Sri Lanka, and the second investment in the country.

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While foreign direct investment in developing countries fell by 12% in 2020 as a result of the pandemic, Norfund increased investments by 20 %, to a record of NOK 4,8 billion.

The COVID-19 pandemic caused one of the worst economic setbacks for the world economy in history and has halted the progress towards SDG 1 – No poverty.

According to an UNCTAD Investment Trends Monitor global foreign direct investment (FDI) collapsed in 2020, falling 42% from $1.5 trillion in 2019 to an estimated $859 billion.

Developed countries had the largest decline, but vulnerable economies of developing countries were also hit hard. FDI flows to developing economies decreased by a total of 12 %, and in Africa by 18 %.

Investing “against the flow”

Despite this, Norfund made record high investments in 2020, investing NOK 4.8 billion in developing countries. This is an increase of 20 % from 2019, when total investments were NOK 4,0 billion. Norfund’s role as a countercyclical investor is more important than ever.

-More than half of Norfund’s investments in 2020 were in Africa. We have seen that we can make an important difference, among other things through contributing with capital to companies that have needed to invest to adapt to the new reality as a result of Covid-19, says Thorleifsson.

Circulating development aid

In 2020, Norfund also agreed on the largest exit in the fund’s history, with the sale of SN Power to Scatec for NOK 10,9 billion, which gave Norfund an annual return of 19%.

The investments of NOK 4,8 billion are more than two and a half times the total 1.85 billion that Norfund received from the state budget in 2020.

– We see that Norfund can use development aid effectively to help create jobs and fight poverty by exiting when we are no longer needed and reinvest the capital, says Thorleifsson.

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