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Technical Assistance Facility in Support of AFD’s Green Credit Line to South African Banks

Accelerating financing of renewable energy and energy efficiency projects in South Africa


YEARS

2014-2016

CLIENT DESCRIPTION

Agence Francaise de Développement (AFD) is the operator of France’s bilateral development finance mechanism, and one of the international donors involved in promoting access to clean energy finance worldwide.

CLIENT'S OBJECTIVE

AFD extended a €120 million green credit line to three south African banks to increase funding of small scale renewable energy and energy efficiency projects. Enclude was contracted to manage the technical assistance facility associated with this credit line.

Results

BUSINESS RESULTS

Ninety-six percent of funds available under the credit facility were utilized, improving access to finance for small and medium sized private sector energy projects.

Increased capacity of partner banks to originate, analyse, underwrite and manage a portfolio of loans for renewable energy and energy efficiency projects.

SOCIAL & ENVIRONMENTAL OUTCOMES:

A total reduction of 306,994 tons in yearly green-house gase emissions.

Yearly energy savings of  91,862 megawatt hours (Mwh).

New installed renewable energy capacity totalling 211,050 megawatt hours (Mwh).

Activities

Providing programme management support to AFD: Activities under this category included acting as first line interface between AFD and partner banks; collecting information and developing each bank’s RE/EE pipeline; ensuring that the banks meet their reporting requirements as described in the agreements with AFD; and assisting AFD in the development of processes for the recycling of loans after disbursement.

Transactional support to banks: This included conducting initial reviews of pipeline projects to assess eligibility for financing under AFD lending criteria; carrying out detailed technical assessments (including site visits) to assess eligibility for financing; and supporting banks in submitting drawdown requests from the AFD facility.

Capacity building support to banks: Refers to the roll out of technical assistance and training assignments to the banks to enhance their capacity in sustainable energy lending.

Knowledge Development: development of knowledge products to share knowledge regarding renewable energy and energy efficiency markets and to disseminate results of AFD’s green credit line.

Programme management & administration: This category of activities include the development of ToRs for specific technical assistance assignments; recruitment, contracting & payment of external service providers; supervision and conducting quality control of short-term service providers, production of quarterly work plans and yearly planning documents.

LEARNINGS

Eligibility and additionality criteria should be clearly defined in the loan agreements signed with the banks under the credit line. For example, eligibility criteria can be made more concrete by not only defining the scale of the projects in terms of investment amount, but also in terms of the size of the implementing company or total exposure to one company. This would ensure a faster, more targeted use of funds and may also permit concessional finance in specific sectors that struggle to finance RE/EE projects.

Focus on pipeline development when supporting banks, and only provide capacity building if banks show tangible commitment to RE/EE financing, for instance by allocating dedicated resources to RE/EE lending.

Include energy storage and hybrid projects in eligible investments, since there is considerable market demand for these projects.

To make sure that built up capacity does not disappear with key staff members leaving the organisation, capacity building efforts should have a strong focus on imbedding tools developed within banks.


South Africa