Smart Financing for Sustainable Growth
Half a billion people in Sub-Saharan Africa live without power, but large-scale initiatives are making gains to put universal access within reach. The United Nations’ Sustainable Energy for All initiative has gained significant traction since it was launched in 2012, and the U.S. Agency for International Development’s Power Africa initiative boasts 18.8 million new connections since the programme was launched in 2013. However, companies delivering off-grid services still face significant obstacles to raise equity from mainstream private-sector investors.
NRECA International has played many key roles in successful energy access initiatives since it was established in 1962. Today, the team is venturing into new technical assistance relationships with enterprises that are introducing creative and practical ways to finance projects that hope to grow local talent, speed up connecting people to power and boost achievement of electrification targets.
With a partner like NRECA International, young and high-potential energy companies can leverage decades of knowledge, insight, and skills into their operations to reduce the early-stage investment risk to financiers. This form of capacity building is being financed through technical assistance grants by private equity firms who seek to play a role in providing power – specifically renewable power, to developing countries.
Such is the case with an agreement that was struck between three entities: Energy Access Ventures (EAV), a venture capital fund keen on investing in businesses in Sub-Saharan Africa who work on providing power and its benefits to that region; SolarX, an up-and-coming off-grid solar energy developer and financier operating in West Africa, and NRECA International, known for deep experience in developing and implementing national rural electrification programs for more than 50 years. This project was funded by the EAV technical assistance facility, whose donors include the CDC Group’s Grant Facility (CDC Plus), which is funded by UKAid from the UK Government, Fonds d’Investissement et de Soutien aux Entreprises en Afrique S.A.S (FISEA) and Fonds Francais Pour L’Environnment Mondial (FFEM).
SolarX has successfully raised its series A financing round, led by EAV, to fund its business in Mali, Burkina Faso and Ivory Coast. Now, the SolarX team is looking to build capacity and grow its engineering and construction oversight capabilities. To do that, NRECA International was brought in to provide engineering and management capacity-building assistance during construction of SolarX’s first five solar energy projects in Mali. NRECA’s scope included an assessment of SolarX’s technical capacity, quality assurance practices, safety procedures, business model viability, existing capabilities and future plans to strengthen their operations for long-term solar energy projects.
With global COVID-19 travel restrictions in place, NRECA International remotely gathered data and conducted an in-depth assessment SolarX’s technical capacity. The results of this assessment combined with the impact of the pandemic, revealed the need for SolarX to develop and strengthen much of its engineering, procurement and construction services in-house, and making sure these services are in line with industry best practices.
The project was completed in March 2021, and a report was provided to EAV and SolarX, with a detailed report of the company’s technical capabilities, accompanied by a gap analysis and areas for improvement and strengthening. A comprehensive Quality Management Plan was also presented to guide the development of future sites in the SolarX portfolio, promising a clear path for growth.
“Awarding a Technical Assistance contract to NRECA International in tandem with an equity investment with SolarX seemed the best way to ensure success on many levels,” said Vladimir Dugin, Principal at EAV. “These types of partnerships can help mitigate the risks of early-stage investors in volatile solar and mini-grid sectors in African countries and strengthen these companies that have the capacity to be market leaders in the future.”
SolarX hopes to expand into Cote d’Ivoire within the next year. For NRECA International, it is becoming clear that financing technical assistance for small young companies in private-sector rural electrification initiatives can lead to smart growth, making investments more valuable and sustainable.
“By working closely with NRECA International, I’m confident now that SolarX can reach our full potential to provide access to power for people in communities who need it,” said Karim Gammache, CEO of SolarX.