The World Bank estimates that the continent needs to generate 7,000 MW annually but such a ramp-up in generation capacity cannot be achieved without private sector participation. The RLSF could potentially become a more widely used solution to solve Africa’s energy deficit challenge.
The RLSF has an initial capacity equivalent to $74 million and will protect Independent Power Producers (IPPs) against the risk of delayed payments by public off-takers. This type of guarantee is a common requirement from the banks that fund the projects. Many projects have failed in to access funding in the past because this guarantee was not available.
The move reflects Uganda’s commitment to ensuring the viability of small and medium-scale renewable energy projects. Speaking during the signing ceremony, Matia Kasaija, Uganda’s Minister of Finance, Planning and Economic Development, commented on the government’s commitment to improving conditions for investors within the energy sector – “Uganda has a solid history of supporting our public concession with upwards of $500 million spent in the last decade on improvements to the grid. With this agreement, we see RLSF providing a perfect complement to our on-going strategy of accelerating the delivery of clean energy to the national grid.”
Uganda has benefited from the GET FiT program, which is an existing energy-sector initiative managed by KfW on behalf of Government of Uganda, that supports countries in developing a standardized set of documentation for power projects and an enabling regulatory framework for IPPs.
Under the RLSF program all renewable IPPs that have not reached financial close, as well as new IPPs can apply for the product.
“RLSF is a tool that can ensure more renewable energy projects reach financial close. For Africa, small and mid-sized projects may be a better fit to the current environment requiring less financing and they can be implemented much quicker. This could be a model that works in many other African markets that may just pave the way for an expansion of the facility or other such initiatives,” noted George Otieno, ATI’s Chief Executive Officer.
