African Renewable Energy Fund launches with $100 million committed capital, including anchor investments from African Development Bank and the Sustainable Energy Fund for Africa

By Joao Cunha, SEFA Coordinator, African Development Bank

The first pan-African renewable energy focused private equity fund, African Renewable Energy Fund (AREF), was launched in March 2014 with $ 100 million of committed capital. Subsequently, AREF's European launch formed part of the Seminar on Sustainable Energy Investments in Africa, held on June 24 and 25 in Copenhagen, Denmark.

The Fund will develop and invest in grid-connected renewable energy (hydro, wind, geothermal, solar, biomass and waste gas) projects ranging between 5 megawatts (MW) and 50 MW. Investors include the Sustainable Energy Fund for Africa (SEFA), African Development Bank (AfDB), African Biofuel and Renewable Energy Company (ABREC), ECOWAS Bank for Investment and Development (EBID), West African Development Bank (BOAD), Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V. (FMO) and Calvert Foundation.

The Fund's manager, Berkeley Energy, which was selected through a competitive process managed by the AfDB, is confident of achieving the fund's target size of $200 million. As such, the organization is keen to establish a dialogue with potential investors, especially with African institutional investors. An office has opened in Nairobi, Kenya and a West African base will be established in 2015. The team's wide ranging experience (engineering, construction, operations, contract negotiation, commercial management and financial analysis) allows the fund to operate effectively and maintain close control over multiple projects in their development phase to deliver reliable, environmentally sustainable and profitable new capacity to Africa's electricity sector.

The Fund's investment-related preparations are advancing well and are following a systematic exploration of the electricity markets in sub-Saharan Africa for potential projects. Berkeley Energy is pleased with the abundance of high-quality opportunities. AREF's opportunities are progressing through the Fund's three-stage investment approval process. These priority projects cover a broad range of technologies: hydro; wind; and geothermal. They have a wide geographic spread as they are planned for Ghana, Ethiopia, Kenya and Uganda. They total approximately 150 MW of new capacity, with potential for further expansion; if the initial phases are successful, to 250 MW or even more. In addition to these priority projects, a variety of opportunities are at early stages of consideration in the above-mentioned Power Africa countries, as well as others in East and West Africa.