Nairobi - The Africa Renewable Energy Fund (AREF) which aims to invest in projects in sub-Saharan Africa has raised $100 million and expects to double that this year, lead investor African Development Bank (AfDB) said on Thursday.
Poor electricity access is a major constraint to economic growth in the region where governments and private sector providers have often struggled to raise funds for capital-intensive projects.
The fund will target small and medium-sized independent power projects producing between 5 megawatts (MW) and 50 MW.
Managed by Mauritius-based Berkeley Energy, the fund will invest between $10 million and $30 million per project, and will have an option of seeking more funds where need arises from other investors for larger investments.
Gabriel Negatu, AfDB's regional director for the East Africa Resource Center, said the fund manager wants to raise $200 million by the end of this year.
“The $200 million is not the end of it. The whole idea is that this is supposed to catalyse and crowd in other investors, so I can assure you that in a few years' time we may be looking at maybe $1 billion or half a billion dollars,” he said during the fund's launch.
AfDB has contributed $65 million of the $100 million raised so far.
AREF, which will have its headquarters in Nairobi, said in a statement that it will target projects in small hydroelectric power plants, wind, solar, geothermal and waste gas.
Negatu said the fund planned to take controlling stakes in 12 green field projects.
Other contributors include the West African Development Bank, Ecowas Bank for Investment and Development, Dutch development fund FMO, Togo-based African Biofuel and Energy Company as well as fund manager Berkeley Energy.
Negatu said the bank was also in talks with Kenya and Uganda on how to best participate in developing infrastructure such as a crude oil pipeline and refinery to harness the two countries' oil discoveries.
“We hope to be able to provide resources. We hope to be able to co-finance, lead arrange, whatever way they would like us to support. We are very much committed to this,” he said. - Reuters