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Burges Salmon advises The Facility for Energy Inclusion on pioneering African solar mini-grid financing

Posted: 20th July 2023

The Facility for Energy Inclusion (“FEI”), managed by Cygnum Capital, has agreed to provide USD 7.5 million to MySol Grid Zambia to finance the construction of 60 solar mini-grids in Zambia, connecting over 40,000 people to electricity for the first time

Burges Salmon, as lead international counsel, has advised The Facility for Energy Inclusion (“FEI”) on its first solar mini-grid portfolio financing. FEI, managed by Cygnum Capital (formerly Lion’s Head Global Partners), has made USD 7,500,000 of senior debt available to MySol Grid Zambia (formerly PowerCorner Zambia) (“MySol”) to fund the construction of 60 solar mini-grid projects in Zambia, which will see more than 40,000 people connected to electricity in off-grid rural areas.

MySol is a subsidiary of Engie Energy Access, one of the leading pay-as-you-go and mini-grid solutions providers in Africa. This transaction provides MySol with the necessary support to construct the mini-grids under the Increased Access to Electricity and Renewable Energy Production (“IAEREP”) programme. As part of IAEREP, the European Union has allocated EUR 6 million of grant funding to MySol. By accelerating the adoption of off-grid energy in Zambia, this transaction will provide economic and social opportunities for families and small businesses across the country who would not otherwise be able to connect to an electricity network.

FEI is a specialist debt fund, designed to support small-scale independent power producers delivering power to the grid, mini-grids, commercial and industrial and captive power projects. FEI was set up by the African Development Bank and also received equity funding from the German Federal Ministry for Economic Cooperation and Development through KfW and Norfund, and a loan commitment from the Austrian Development Bank. The AfDB also invested on behalf of the Clean Technology Fund and the European Commission. FEI is managed by Cygnum Capital, an investment bank and asset manager, operating across frontier and emerging markets. Cygnum Capital has over USD 750 million of assets under management with investments in more than 27 African countries.

Whilst FEI is already one of the leading funders of renewables in the Africa Commercial and Industrial (C&I) market, this is FEI’s first transaction in the mini-grids sector. The long-term debt financing represents significant progression in the African mini-grid market, expanding energy access to off-grid communities, creating economic growth and increasing socio-economic welfare in the community.

The Burges Salmon team which advised FEI on this transaction was led by specialist Project Finance lawyers Stuart McMillan and Luke Addison. Stuart and Luke have extensive experience advising on renewable energy transactions in Africa, and recently advised on Africa’s second largest solar mini-grid portfolio project-financing. Stuart and Luke were supported by a multi-disciplinary team of energy and infrastructure sector specialists from across the firm, including James Horton, Roshni Varsani, Emily Cranston, Thomas Papke, and Sam Effiong.

Carmen de Castro, Managing Director of Cygnum Capital, comments: “Small scale renewable infrastructure and mini-grids are fundamental in driving economic and social development across Africa. This inaugural transaction in the mini-grid sector demonstrates FEI’s commitment to improving energy access and supporting transactions with high development impact designing innovative structures with a commercial approach. We were pleased to work with the Burges Salmon team, who have significant experience in similar transactions, and were responsive and thorough in supporting us on this complex transaction.”

Gillian-Alexandre Huart, CEO of ENGIE Energy Access, adds: “Attracting non-recourse long-term debt financing for mini-grid projects is proof of the viability of the business model and the legitimacy of renewable mini-grid projects in the rural electrification landscape. This financing will contribute to the Sustainable Development Goals of the United Nation by providing almost 5 MW of affordable, reliable, and sustainable clean energy to more than 40,000 beneficiaries living in rural areas in Zambia.”

Burges Salmon worked with August Debouzy in France, and Corpus Legal Practitioners in Zambia, on matters of local law on this multi-jurisdictional financing.

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