AfrElec: NORAD commits $56mn grant to African Trade Insurance Agency

The Norwegian Agency for Development Cooperation (NORAD) has committed to provide NOK500mn ($56mn) in grant funding to the Nairobi-based African Trade Insurance Agency (ATI) over an initial period of five years.

“This innovative instrument helps unlock the private finance needed to bridge the energy access gap, while also contributing to reduced greenhouse gas emissions,” NORAD director-general Bård Solhjell said in a press release.

The grant will support the continued implementation of ATI’s Regional Liquidity Support Facility (RLSF), which aims to mobilise private investment into renewable energy projects in Africa while contributing to achieving the UN Sustainable Development Goals 7, 8 and 13.

The grant will also support the development of additional insurance or guarantee products in support of small and medium-sized renewable energy sector initiatives.

The funding from NORAD, which will be split across first loss cash collateral for the various initiatives and technical assistance support for ATI, will be provided by the Norwegian Ministry of Foreign Affairs.

ATI provides political risk, credit insurance and surety insurance. ATI and German Development Bank KfW launched RLSF in 2017 to tackle climate change and attract investments by supporting renewable energy projects.

RLSF addresses short-term liquidity risks in financing of small and medium-sized renewable energy projects in sub-Saharan Africa, by combining ATI’s suite of insurance products with a liquidity support instrument.

RLSF has supported four solar projects in Burundi and Malawi, enabling over $150mn in project financing and installed capacity of 108.5 MW. ATI has supported other renewable energy projects across its member countries, enabling an installed capacity of over 500 MW.

ATI’s current gross exposure in direct support towards the generation of renewable energy transactions stands at $210mn with the grant and support from NORAD, this exposure is poised to increase in the long term.

RLSF can be accessed by IPPs located in ATI member countries that sign onto RLSF Memorandum of Understanding (MoU). Benin, Burundi, Côte d’Ivoire, Madagascar, Malawi, Uganda and Zambia already signed the MoU with the expectation more of ATI’s 20 member countries will follow.