Supports Tanzania's NDC (2018) targets to reduce GHG emissions by up to 20% by 2030 and promote diversification of the energy system. The expansion of energy access will contribute to achieving the 70% by 2030 electrification target (SE4All Action Agenda 2015). Project’s numerous productive use customers and social service providers support sustainable economic growth in rural communities, which aligns with Tanzania’s Development Vision 2025.
Tens of thousands of Tanzanians are set to gain first-time access to clean energy after a landmark deal was struck to provide long-term finance for solar PV mini-grids.
Historically, mini-grid developers have struggled to attract long-term financing due to the perceived risks involved and the small-scale nature of individual installations. Now a new funding vehicle is breathing life into Tanzania’s promising mini-grid sector, and is expected to pave the way for approximately 60 new solar PV installations.
Once completed, they will provide energy access on a Pay-As-You-Go (PAYG) basis to nearly 40,000 people in homes and businesses in rural Tanzania. As of 31 March 2021, 932 homes and microbusinesses had been connected via eight mini-grids, providing electricity to approx. 4,660 people.
The funding vehicle – which was established by CrossBoundary Energy Access (CBEA) in partnership with PowerGen Renewable Energy, and is being supported with a USD 3 million results-based long-term senior loan from REPP – will purchase existing and future operating mini-grids in Tanzania. PowerGen will continue to provide long-term customer and asset management services to the mini-grid customers.
The pioneering business model means CBEA – which was set up in 2019 with investments from the Rockefeller Foundation and Ceniarth – has committed to acquire the mini-grids from PowerGen soon after completion. The certainty of a long-term owner ready to acquire their projects enables PowerGen to develop and construct projects at scale, continually recycling its capital.
As the operator, PowerGen will be incentivised to ensure the efficient operation of the sites and quality customer care via a base services fee with the potential for a performance bonus where the grids’ revenues exceed projections. The agreement also includes a developer premium in the form of a share of the distributions from the portfolio.
REPP’s USD 3m commitment in CBEA was arranged by the programme’s manager Camco Clean Energy. The platform previously provided early-stage funding assistance and support for PowerGen in 2016.
In December 2020, CBEA open sourced its investment approach to mini-grids in Africa, which was developed with its strategic partners, including REPP. It is hoped that by open sourcing the approach, it will help accelerate universal access to electricity in Africa by unlocking access to the USD 1 trillion infrastructure capital markets that mini-grids need to scale.
This white paper is the first key document released by CBEA, with term sheets and a template project finance model to follow in early 2021.
Contracted date: 31 December 2016
Lending type: Development capital
REPP funding: USD 345,000
Recipient: PowerGen Renewable Energy
Contracted date: 5 July 2019
Lending type: Results-based senior loan
REPP funding: USD 3,000,000
Recipient: CrossBoundary Energy Access (CBEA)
The vehicle set up by CBEA and the funding provided by REPP allow for us to scale, with the ultimate goal to serve millions of households and small businesses in Africa with clean, affordable, and 24/7 power. With this support, we can bring energy access to scale more rapidly, while focusing on driving excellence in our customer experience.- Aaron Cheng, President, PowerGen
This groundbreaking approach – bringing project finance to the sector for the first time – provides a repeatable, long-term sustainable model that is needed for mini-grids to scale. We hope that this facility becomes a template that can benefit the whole sector.- Sebastian Deschler, General Counsel, CrossBoundary