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Germany backs renewable energy projects in Africa

Germany backs renewable energy projects in Africa with the launch of RLSF - an innovative liquidity facility managed by ATI

 

in by providing immediate liquidity to keep the IPP afloat during periods of payment delays that are beyond the grace period provided in the power purchase agreement.

Günther Nooke, Personal Representative of the German Chancellor for Africa, BMZ, said (Left to right) Thomas Duve, Director Southern Africa and Regional Funds KfW Development Bank - and John Lentaigne, Chief Underwriting Officer, ATI“The Regional Liquidity Support Facility will address a key challenge in renewable energy project finance and de-risk private sector investments. We are pleased to provide the funding to this innovative instrument underlining Germany’s commitment to the objectives of the African Renewable Energy Initiative (AREI).”

The RLSF is designed to help independent power producers (IPPs) developing renewable energy projects in Africa to obtain the liquidity they need in the event that their off-taker (frequently a state owned entity) delays payment. The facility will provide immediate cash collateral supported by guarantees to a commercial bank that will in turn open a standby letter of credit to the benefit of the IPP. The amount provided will enable the IPP to operate and service the debt for up to 6 months. Furthermore, unlike most IPP letters of credit (which tend to be 12 month tenors) the facility is designed to be in place for multiple years.

Dr. Thomas Duve, KfW Director Southern Africa and Regional Funds, noted “We highly appreciate the opportunity to partner with ATI on this innovative instrument. The RLSF is a strongly market-driven concept, emphasizing KfW’s strategy to support and leverage the resources of local partners and the private sector.”

The facility, in combination with ATI’s traditional suite of political and trade credit risk insurance products (in particular ATI’s arbitration award default cover), means that ATI is able to cover the full range of political and financial risks facing investors on such projects.

Speaking at the launch, John Lentaigne, ATI’s Chief Underwriting Officer commented “We are delighted to be working with the German government, represented by KfW, on an initiative that directly targets one of the main bottlenecks preventing green power projects from being financed in Africa.”

Jef Vincent, Senior Advisor to ATI, who has overall responsibility for the initial implementation of the facility, added “Unlike some of the alternative solutions to the liquidity issue, ATI’s guarantee (as provided via the RLSF) will not require a counter-guarantee from the relevant Ministry of Finance, and as such we are confident this will be a very useful tool for those projects that we expect to support.”

 

 

 

 

 

 

 

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