Engaging National and Regional Finance Wolfgang Mostert SE4All workshop, Danida/UNEP-Risoe Copenhagen,

Who is looking for finance? Ongrid-electrification: utilities, consumers (connections) Mini-grid electrification: developers Off-grid electrification: developers, dealers Improved cookstoves – Biomass: dealer-manufacturers, consumers – Biogas: manufacturers, consumers – LPG: bottlers, dealers, consumers – Natural gas: consumers (connections)

National Private Capital Finance Sector (Development Banks) Commercial Banks Risk cover providers Risk capital providers Physical sector Project Developers (special purpose vehicles) Private utilities Dealers

Annual volume of private finance E4all – IEA estimates Electricity for all – World USD 48 billion, Sub-Saharan Africa 30 b. – Private finance share: world 15 b. Modern cooking facilities for all – Sub-Saharan Africa USD1.5 billion – Private finance?

RESULT: Financial Transfers – From stagnating sectors to growth sectors – Within sectors from stagnating companies to growth companies – Within companies to high value activities OUTCOME: Allocation of Economic Ressources Financial Institutions Core Functions: Financial Institutions Operating Modality ARBITRAGE LIQUIDITY: RISK COVER Investment finance, trade finance, working capital Insurance, guarantees, hedging What does the Finance Sector provide and look out for?

Wholesale Finance and Retail Finance RE-Projects Construction Finance Re-finance upon commissioning INSTITUTIONAL INVESTORS Risk Cover Finance BANKS MFIs End-User Finance Investment & working capital, end-user finance EQUITY INVESTORS Supply Chain Funds of Funds Bank bonds Project bonds SPVs Working capital

Reaching Scale + Risk Reduction Scale is essential: For attracting the finance sector’s interest in the RE-sector For reducing the costs of transactions, (and, as a consequence rate of interest) Project finance for small-scale projects is not realistic Conducive policy & regulatory framework is the most effective risk reduction ”measure”: Cost covering tariff policy Subsidy policy and budget for financially non-viable RE-projects Transparent sector regulation Legal support for handling non-payment by customers Public finance instruments: Partial risk guarantees Partial credit guarantees Etc, etc

Specific Instruments for specific Challenges Expanding loan tenor: liquidity guarantees Lack of equity capital: Structured funds with public first loss facility (e.g. GCPF) Drawing in institutional investors: Wrapped bonds (e.g. by GuarantCo) Finance for start-up SMEs SCAF: transaction cost support to draw equity funds into ”angel investor” activities Incubation facilities (e.g. Kenya’ Climate Technology Center/Fund) Moving established firms into RE-business Challenge funds for testing usiness concepts (e.g. REACT) End-user finance Publickly backed partial credit guarantees to dealer finance Using electricity utilities as conduits for loan administration Guarantee covering “X”% of all losses beyond a 5% first-loss threshold by utilities giving loans to cover cost of connection Portfolio guarantees to bank wholesale loans to MFIs

How does ”cash on delivery aid” fit in? A long range of public finance instruments are being applied to address almost any obstacle to local private finance operating within well- define policy and regulatory frameworks An portfolio of public finance instruments is needed in all countries How do you fix support rates (e.g. per connection payment) in energy+ in countries using a very decentralised system for access