Infrastructure
The landscape of infrastructure project financing has undergone significant changes in recent years. Stricter regulations for Independent Power Producers (IPPs) have rendered traditional financing models less attractive, and a decline in participation from medium-sized IPPs has further limited options. BIO's project size limitations have also restricted its involvement in large clean energy projects. The department faces increased competition from other impact investors with deeper pockets and access to blended finance tools. Investors are grappling with additional burdens such as withholding taxes, local currency depreciation, and rising interest rates which threaten project viability. Local Currency Power Purchase Agreements remain problematic in certain countries, and high legal costs associated with non-local legal frameworks add further complexity. Finally, dependence on public subsidies introduces an element of political risk in some projects.
Despite these challenges, opportunities abound. The need for limited recourse financing in renewable energy projects persists. A growing demand for green energy diversification within countries presents new avenues for investment. Smaller-scale IPP projects in Africa offer promising possibilities. Most importantly, BIO's revised policy allowing cross-border projects opens doors for regional development in the clean energy sector.
To navigate this new reality, the Infrastructure department must embrace blended finance to offer more competitive solutions. Exploring partnerships with other DFIs for co-financing opportunities can leverage combined resources and expertise. Streamlining internal processes can expedite project approvals and improve efficiency. Finally, advocating for policy changes that incentivise private sector participation in renewable energy is crucial for long-term sustainability.
2023 investments in infrastructure
BIO has granted a USD 7 M loan to candi solar, a company installing, owning and operating solar production plants and selling electricity to clients in India and South Africa.
BIO has granted USD 100 K of technical assistance to Nordic Solar, to finalise the transaction for the financing of a solar power plant in Nicaragua.
BIO has granted a USD 8.8 M loan to Nordic Solar for the construction of a 14MW solar PV plant in Nicaragua.
BIO has granted a USD 12 M loan to TowerCo of Africa Uganda (previously Ubuntu Towers Uganda), a Ugandan solar-powered telecom tower company and a subsidiary of Tower of Africa.