48259 - FEI Debt Fund

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Summary of Investment Information

Project Number

48259

Company Name

FEI-Ongrid LP

Date SPI Disclosed

Sep 26, 2023

Country

Africa Region

Region

Africa

Projected Board Date

Oct 26, 2023

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

May 26, 2024

Department

Regional Industry - INF Africa

Industry

other

Previous Events

Approved : Dec 5, 2023
Signed : Dec 21, 2023
Invested : May 24, 2024

Sector

Infrastructure Fund

Additional Project Attributes

Blended Finance

Project Description

Facility for Energy Inclusion (“FEI” or the “Fund”) is a dedicated pan-African decentralized renewable energy (“DRE”) focused structured debt fund. The Fund provides debt financing to companies operating in the small to mid-scale distributed power sub-sectors, including Commercial and Industrial (“C&I”), Telecom Energy Service Companies (“T-ESCO”), Mini-Grids (“MGs”) and small Independent Power Producers (“IPPs”).

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	30.0
Equity

Development Impact

The main project-level outcomes are expected to stem from the stakeholder effects through increased access to affordable and quality electricity supply to C&I customers, residential customers (through mini grid or IPPs) and other users of DRE solutions in Africa. The project will also have positive environmental effects stemming from the provision of solar solutions displaying power supplied by more carbon intensive sources. Beyond the project, the investment is expected to demonstrate the viability of a model that offers senior long-term debt structured as asset finance, equipment finance or project finance to DRE customers for the implementation of renewable energy solutions, with the potential of leading to replication in the target markets.

IFC’s additionality in this Project is expected to be both financial and non-financial. Financial additionality consists in providing medium-term debt that is not readily available in the market to support the largely nascent DRE industry in Africa. The financing will be supported by blended finance which will enable the Fund to reach target size, while continuing its investment in countries that face higher inherent risks at a reasonable price for the borrower. IFC is also expected to mobilize financing from MCPP. IFC’s participation is expected to contribute to non-financial additionality through standard setting by supporting the adoption and implementation of a framework to manage environmental and social risks and impacts from the Fund’s investments.

E&S Category Rationale / Risks and Mitigation

The Project entails an investment of up to US$80 million in the Fund to support small-scale renewable energy projects in Africa. The Fund's pipeline and portfolio includes independent power producers, mini-grids, commercial and industrial projects, and energy services companies. The end-users' sectors of activity include telecommunications, manufacturing, agriculture, and hospitality, among others. The expected E&S risks and impacts of the Project are considered medium. As such, the Project has been categorized as Category FI-2 in accordance with IFC's Sustainability Policy. The Project will not support coal-related activities or higher-risk business activities that may include a) involuntary resettlement, b) risk of adverse impacts on Indigenous Peoples, c) significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage or d) significant Occupational Health and Safety risks. The applicable E&S performance requirements for this Project include the IFC Exclusion List, relevant host country E&S laws and regulations, and the IFC Performance Standards. The key E&S risks and impacts derive from the Fund Manager's capacity to identify and manage the potential E&S risks associated with its financing activities. Typical risks and impacts include occupational health & safety, supply chain-related risks, labor and working conditions, and waste management, among others.

The Fund Manager has developed an E&S management system. The ESMS applies to the Fund's financing activities and has been integrated into the Fund's investment cycle. The E&S risk assessment process includes screening prospective transactions against the Fund's ESG Policy and Exclusion List, identification of ESG risks and initial project categorization, E&S due diligence assessment, development of mitigation measures to manage the E&S risks identified, inclusion of ESG clauses into the investment agreement, and continuous monitoring. The applicable E&S requirements include the FEI Exclusion List (in line with IFC's Exclusion List), national and local environmental, health, safety, and labor laws and regulations, and the IFC Performance Standards. Investment staff are required to undertake E&S risk management training, and the Fund Manager procures the services of third-party E&S consultants to support ESMS implementation. The Fund Manager has developed an external communication mechanism and will need to elaborate further on the internal process steps for handling grievances received. The E&S management system will need to be enhanced by improving the existing solar supply chain screening provisions and developing a framework to identify and assess contextual risks related to prospective investments.

Contacts

For Inquiries About the Project, Contact

FEI-ONGRID LP
Carmen de Castro
Managing Director of FEI
+32 472697514
carmen.decastro@cygnumcapital.com
130 Buckingham Palace Road, London, SW1W 9SA, United Kingdom
https://www.feiafrica.com/

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Task Title & Description	Anticipated Completion Date
Enhance ESMS	11/30/2023
Enhance E&S monitoring protocols	11/30/2024

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