Blending grants and finance Professor Plutarchos Sakellaris Athens, June 2014

Blending: combination of grant resources (normally, EC) with loans from eligible public financial institutions (e.g. EIB) and commercial lenders. Blending facilities: EU-Africa Infrastructure Trust Fund (ITF). Established in Neighbourhood Investment Facility (NIF). Launched in Facilities set-up following NIF’s model: Investment Facility for Central Asia (IFCA – 2010) Latin America Investment Facility (LAIF – 2010) Asia Investment Facility (AIF – 2012) Caribbean Investment Facility (CIF – 2012) Investment Facility for the Pacific (IFP – 2012) Western Balkans Investment Framework (WBIF). Introduced in 2009.

Blending comprises 5 modalities of support: 1.Investment grants 2.Interest rate subsidies 3.Technical Assistance 4.Risk capital (i.e. equity & quasi-equity) 5.Guarantee mechanisms Objective: mobilize investments

EU-Africa ITF Objective: contribute to achieving the strategic objectives of the EU-Africa Partnership through targeted funding aimed at making up the regional and continental deficit in infrastructure. Eligible projects: a) trans-border infrastructure project, or b) a national project with a demonstrable regional impact on two or more countries, or c) a national project in the context of the "Sustainable Energy for All“initiative. Eligible sectors: (a) Energy, (b) Transport, (c) Water, and (d) IT.

Examples: 1) East Africa – Lake Turkana Wind Power (300 MW) Grant: EUR 25 million (preferred equity share) EIB: EUR 200 million AfDB: EUR 110 million EDFIs loans + equity: EUR 288 million Total project cost: EUR 620 million

2) Africa Sustainable Energy Facility Risk-sharing with local banks to finance smaller RE investments Partial risk guarantee (say 50%, comprehensive, first- demand) From EU ITF: a) EUR 5 million, First-Loss Piece to reduce EIB risk b) EUR 3 million, Technical Assistance (banks, developers)