CrossBoundary Energy Access (CBEA), Africa’s first project financing facility for mini-grids, has announced its first transaction of $5.5m to finance 60 mini-grids in Tanzania.

On this transaction, CBEA has partnered with PowerGen Renewable Energy, one of the sector’s leading mini-grid developers and operators.

As part of this transaction, CBEA has signed a loan agreement with the Renewable Energy Performance Platform (REPP), a UK government-backed funding platform managed by Camco Clean Energy, focused on helping renewable energy projects attract and access private and institutional investment.

REPP’s innovative facility will provide a long-term senior loan, structured as project finance debt, supporting this new asset class to be financially sustainable.

CBEA was established earlier this year with investments from the Rockefeller Foundation and Ceniarth to provide long-term funding for mini-grids on a project finance basis, delivering first-time grid-quality power to rural households and businesses. 

CBEA’s initial investment will fund 60 mini-grids providing grid-quality power for the first time to 34,000 people in rural homes and businesses in Tanzania.

It is the first time that a long-term project finance structure – traditionally used to fund large-scale infrastructure projects – is being used in the rural mini-grid sector in Africa.

Mini-grid developers like PowerGen have so far struggled to attract long-term financing for their projects because each mini-grid is too small to be individually financed.

To address this, CBEA established a special purpose entity in Tanzania that will purchase PowerGen’s existing and future operating mini-grids in Tanzania.

PowerGen will continue to provide long-term customer and asset management services to the mini-grid customers.

This minimizes transaction costs and allows investors and lenders to provide longterm financing based on the cash flow generated by the assets themselves.

A core feature of CBEA’s business model is the creation of a long-term sustainable structure through the close alignment of incentives between PowerGen as the developer/operator and CBEA as the long-term owner of the mini-grid portfolio. The sale of the mini-grids to CBEA soon after completion allows PowerGen to recycle capital and focus on developing more projects.

A developer premium in the form of a share of the distributions from the portfolio, and an operating fee that includes a performance bonus where the grids’ revenues exceed projections will allow PowerGen to benefit as it operates grids more efficiently and provides customers with better service.

As a result, both CBEA and PowerGen’s profits come from the grids performing well and providing long-term value to the most important stakeholders - their customers.