Empower New Energy, a Norwegian solar development and investment company, has signed an agreement to raise US$74 million from a consortium led by Climate Fund Managers to develop solar projects in the Africa Commercial and industrial (C&I) sector.
The partnership will develop, finance, own and operate an initial 150MW of solar projects over the next three years.
Norfund is investing US$12.5 million in this capital raise. In addition, the investor consortium is joined by Janeiro Energy AS, an investment company partly owned by Svein Harald Øygard, a profiled Norwegian economist and investor. Climate Fund Managers manages the blended finance facility, Climate Investor One.
In addition to the equity capital, the consortium will aim to raise debt, enabling Empower to invest a minimum of US$100 million over the next three years.
This will enable the company to develop, build, own and operate more than 150 MW of solar projects (including batteries) for commercial and industrial users in Africa, avoiding 200,000 tons of CO2 and generating more than 240 GWh of solar PV electricity on an annual basis, and creating or protecting approximately 15,000 jobs.
Empower and its investors have agreed to earmark 1% of the revenues generated by the projects for a community development programme, focused on projects that can deliver high impact in socially disadvantaged communities in targeted markets.
Africa is estimated to have about 60% of the world’s solar resources but has only received around 1% of the world’s installed solar capacity.
In 2021, Africa’s share of total investments in renewables fell to below 1%. The largest barrier to realising renewable projects in Africa is high capital costs.
The International Energy Agency has estimated that the capital costs of investing in clean energy in sub-Saharan Africa can be more than five times higher than in the USA and Europe.
Renewable energy projects tend to be smaller in Africa than in other parts of the world. This creates prohibitively high transaction costs.
Empower’s platform investment model helps spread the risk across multiple off takers and countries and to keep transaction costs low. Financing costs are thus reduced by raising debt at portfolio level.
Terje Osmundsen, Empower Founder/CEO, said this is the largest single capital raised in Africa’s C&I market to date.
“In large parts of Africa, companies tend to pay 25-50% more for electricity than elsewhere in the world. As a result of our investment in on-site solar power production, often including batteries, our off-take partners can reduce electricity costs by 15-20% or more,” he explained.
Empower New Energy raised its first capital of US$7.9 million in 2019 and has so far carried out 8 solar investments for industrial and agricultural off-takers in Egypt, Ghana and Nigeria.
It has also signed contracts worth more than US$30 million with other off-takers in Egypt, Morocco, Ghana and Nigeria.
