52162
Session 12:
Financing (and
subsidies) for
Small
                        T      he experience of SenterNovem and E+Co in
                               developing     private    entrepreneurship
                               operating renewable energy projects reveals a
                               number of typical issues faced by small providers.
                       Their financial, managerial and technical expertise is
                                                                               for


Providers and
                       often very low. Also, there is little experience with
Renewable              regulatory frameworks for small providers (however, see
Energy                 the presentation of the Tanzanian regulators in Session
                       8.) In addition, commercial banks are generally not
                       willing to finance small scale (typically offgrid) projects
                       mainly due to a lack of experience and a related
                       perception of higher risk. In some developing countries
                       outside of Africa, the financing bottleneck has been
                       alleviated to some extent through specialized lines of
                       credit or partial guarantees established with the
                       assistance of the World Bank and other donors as well as
                       specialized financing companies.

                       The approaches presented at the workshop aim at
                       decreasing the need for public sector subsidies (and
                       increasing private sector equity) through the
                       participation of venture capitalist investors. One of the
                       key challenges regarding the involvement of venture
                       capitalist partners is their need for higher returns
                       demand because of actual or perceived risks (notably the
                       country and foreign exchange risks).

Thursday, June 11,      Small providers need technical and business support.
2009
                        Entrepreneurs require guidance in transforming general
                        proposals into “bankable” business plans of sufficient
                        quality. The business plan should explicitly demonstrate
                       the viability, identify specific risks and formulate
                     mitigation measures. AMADER, Mali’s REA, has developed
                     model business plans for use by new private operators
                     seeking grant money (see Session 4).

                     The African Biofuel and Renewable Energy Fund example
                     emphasizes the role donors can play in developing national
                     renewable energy markets in SSA. In addition to support for
                     renewable energy initiatives, donors can also provide
                     financing to municipalities and communities. Donors can
                     support renewable energy investment facilities with major
                     local banks and initiatives aimed at minimizing the risks
                     faced by the banks with regard to renewable energy
projects. The banking sector should build capacity to reduce the risks of financing
renewable energy.

A recent survey of renewable energy executives presented by the newly established UNEP
RE Finance Centre confirms the importance of strong government commitment to scaling
up electrification and a friendly investment climate for an increased financing flow to
innovative energy enterprises. In the context of the current financial crisis, investments in
rural energy power projects have slowed down and many developers have abandoned
business. The financial crisis has also led to higher cost of borrowing and shorter
repayment periods. Large transactions have been more successful than smaller deals.

Presentations:

Commercial funding for small scale providers. Kofi Nketsia-Tabiri, Regional Manager,
E+Co.

ConCap: Building a new fund for SSA access? Dr. Fritz-Morgenthal, UNEP Reewable Energy
Finance Centre & Connective Capital AG.

Subsidy for private sector MHP. Case study in Rwanda. Marcel Raats, Energising
Development / SenterNovem.