Scaling up on African renewable energy investments

Scaling up on African renewable energy investments

Empower New Energy, a company connected to the Energy.Invented platform, and African Guarantee Fund for Small and Medium-sized Enterprises (AGF) has signed an equity guarantee agreement. The first guarantee will cover part of Empower’s investment into Ghana’s Solarplast Project Company Limited. 

– We are delighted to enter a new partnership with AGF and to be the recipient of their first equity guarantee. The potential of the commercial and industrial renewable energy market in Africa is significant but requires highly tailored solutions that reflect the specific needs of companies, says Terje Osmundsen CEO of Empower New Energy in their press release.

Empower is scaling up its African renewable energy investments this year, and the instrument is expected to be the first of many. The guarantee has also enabled the financing of a rooftop solar PV facility at the factory premises of Miniplast Limited in Accra, Ghana.

Meeting Africa’s growing demand for power

– Through this equity guarantee agreement with “Empower New Energy”, AGF is indeed broadening the range of financing instruments available to SMEs in Africa, to enable them to continue playing their role in growth, innovation, and job creation. We are also particularly glad that our equity guarantee has enabled the financing of renewable energy thereby contributing to meeting Africa’s fast-growing demand for power, says Jules Ngankam CEO of AGF Group.

The partnership will pave the way for long-term renewable energy investments for commercial and industrial businesses across Africa. Norad has also provided partial support to the costs of the guarantee.

Equity finance is crucial

– As Empower scales up this year, combining our unique investment model with AGF’s equity guarantees will reduce risks and help to provide cheaper, more reliable energy for even more businesses across Africa, says Osmundsen.

In Africa, bank lending represents by far the largest source of external finance for SMEs. A lot of the companies rely on traditional debt to fulfill their cash flow and investment needs. This can lead to inappropriate use of short-term funds to finance long-term projects. The consequence of this can be an increase in financial distress as their debt-to-equity ratio increases. Equity finance is crucial for SMEs seeking long-term investments, to sustain innovation, value creation, and growth.

– The low level of capitalization of SMEs and excessive reliance on debt financing compared to equity imposes costs and increases the risk of financial distress and bankruptcy. While bank financing will continue to be crucial for the SME sector, more diversified options for SME financing are needed to support long-term investments and reduce the vulnerability of SMEs to changes in the credit market, says Nganka.

About Empower New Energy

Empower New Energy is an impact investor in African renewable power generation, with a proven business and operating model. They serve Commercial and Industrial clients and local communities by mobilizing international capital and operating assets effectively. In partnership with their local development partners, they prepare the projects for investment, finance the construction and manage the assets. Nigeria is one of Empower’s investment countries, alongside Ghana, Egypt, Kenya, and Morocco. Empowers investors are Norfund, ElectriFI (European Union) & 15 Norwegian and European private investors. Read more here.