The project is developed as one of the key European responses to the Sustainable Energy for All initiative. The objective of the Africa Energy Guarantee Facility (AEGF) is to provide proper risk mitigation and credit enhancement solutions to facilitate and increase private sector involvement in the African energy sector. Despite the large energy infrastructure gap (in all three areas of: generation, access and efficiency) and the growing demand for energy in many countries, private sector investments and involvement in the African energy sector remain 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 Facility was launched in March 2018 and the first projects to benefit from its risk mitigation are expected by end-2019.
The ITF grant has so far been used to finance the market studies (including market potential; existing alternative/competing products; investment strategy and fund positioning). The grant is currently used for the implementation of the AEGF, where it is supporting the negotiation with investors and the drafting of legal documentation, operational policies and guidelines.
Any remaining funding will be used for:
- Financing of part of operational costs during AEGF’s start-up and ramp-up period
- Establishment of the Facility agent's infrastructure and systems
- Operational start up (e.g. marketing, origination)
- Evaluation of the initial launching phase and proposals for amendments of its modus operandi.