Harith General Partners, one of Africa’s leading investors in infrastructure, has partnered with one of its wholly owned portfolio companies to start the Pan-African Renewable Energy Fund (PAREF), which it hopes will accelerate renewable energy adoption across the continent.
Diversified power investment vehicle Anergi Group, which was acquired by Harith managed funds in 2009, will partner with Harith to commence raising a targeted $300m in capital for PAREF, which it plans to source from institutional investors and development finance institutions (DFIs) across Europe, North America, Africa and Asia. The renewable energy fund is targeting a first close of $100m by the end of the first quarter of 2023 and expects to deliver returns in line with those of other on-grid and off-grid power projects in Africa.
“We will primarily be approaching institutional investors and DFIs whose environmental, social and governance mandates align quite well with what we are aiming to do with the fund,” said Patrick Afordofe, an investment manager at Harith.
Apart from investing in new greenfields renewables projects PAREF will also seek to convert carbon-intensive power generating sources to more sustainable alternatives to help encourage Africa’s transition towards a low-carbon economic paradigm. At the same time it aims to play a key role in bridging the energy access gap on the continent, where the majority of people still do not have access to reliable electricity.
The International Energy Agency (IEA) estimates that closing the energy access gap in Sub-Saharan African countries will require an annual investment of $28bn from now until 2030, which includes $13bn for mini-grids; $7.5bn for on-grid investments and $6.5bn for off-grid investments. To help tackle this PAREF will target investments in a mix of renewable power and energy projects across Africa with off-grid commercial and industrial and captive power generation projects prime candidates for investment.
Nevertheless, PAREF will look to invest in larger government-backed renewable energy projects such as wind farms or solar energy initiatives meant to feed directly into countries’ national grids. Even so, these larger on-grid projects are likely to require co-investment from DFIs, banks and other investors.
“A key feature of the PAREF is that we’d like to grant co-investment rights to investors who invest in the fund so that they can invest alongside us on certain projects, particularly the larger government-backed on-grid projects,” said Afordofe.
PAREF will have an expected investment horizon of between five and seven years for each project it invests in, though Afordofe said the expected life of the fund as a whole is likely to be between 10 and 12 years.
“These renewable projects can take anything from one to three years to build, depending on the type of technology being utilised, so we’ll be looking at an investment time frame of at least five to seven years,” said Afordofe.
Anergi has established a good track record in developing, financing and executing some of the largest independent power projects in Africa. The Harith-backed investment vehicle has an underlying portfolio of five operating assets with a total installed renewable and thermal generating capacity of 1,413MW, supplying up to 23-million customers in Ghana, Kenya, Nigeria and SA.
“Of the 770-million people without access to electricity, 75% live in Sub-Saharan Africa,” said Harith CEO Sipho Makhubela. “Coal, oil and biomass continue to play a significant part in Africa’s energy supply chain and the continent remains extremely vulnerable to climate change. PAREF will aim to take Africa’s energy supply into the 21st century to enable the transition to a low-carbon future.”
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