The objective of the Africa Energy Guarantee Facility (AEGF) is to provide risk mitigation and credit enhancement solutions to facilitate and increase private sector involvement in the African energy sector. Despite a large energy infrastructure gap and a growing demand for energy in many countries, private sector investment and involvement in the African energy sector remains modest. Issues such as regulatory uncertainties, weak off-takers and more generally weak business environments dissuade the private sector and increase the level of transaction costs.
The project aims at providing solutions contributing to SE4All objectives by increasing access to modern energy services, increasing available private financing for energy efficiency measures and increasing available private financing for renewable energy in Africa.
The ITF grant has so far been used to finance feasibility studies (Phase 1) for the AEGF. This consists of the following elements:
- Market study (including market potential; existing alternative/competing products; investment strategy and fund positioning)
- Recommended implementation plan (Legal feasibility; Governance structure and Financial modelling)
Phase 1 is now complete and the project has progressed to next phase.
Phase 2 - Implementation of the AEGF - where the ITF funding will support:- Preparation of Business Plan and Information Memorandum
- Negotiation with investors
- Drafting of legal documentation, operational policies and guidelines
- Facility commitment. Any remaining funding will be used in phase 3 - Financing of part of operational costs during AEGF’s start-up and ramp-up period
- Establishment of the Fund Manager infrastructure and systems
- Operational start up (e.g. marketing, origination)
- Evaluation of the initial launching phase and proposals for amendments of its modus operandi.