US aims to expand lending to green African projects

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    The US government’s Overseas Private Investment Corporation (Opic), which supports US project sponsors in emerging markets and has a current portfolio worth $13-billion in more than 150 countries, wants to materially expand its support for renewable energy and clean-tech projects in South Africa, a well as the rest of sub-Saharan Africa.
    The agency’s current portfolio includes energy projects generating a cumulative total of more than 2 200 MW of clean power, including solar, small hydro, wind, geothermal, biomass, and waste-to-energy.
    Investment development and coordination MD John Moran, who is in South Africa to promote Opic’s product offerings, tells Engineering News Online that the agency’s mandate has been realigned to the development priorities of President Barack Obama’s administration, which has a keen focus on Africa and green industries.
    He says that, given its current resources, Opic is in a position to increase its overall exposure toward its $29-billion ceiling and that there is, thus, significant headroom to increase its lending activities in South Africa – the key constraint being a pipeline of bankable projects, which include significant US company participation.
    Opic offers favourable long-term, fixed-interest debt of between $100 000 and $250-million, as well as insurance products covering risks such as expropriation or nationalisation, through to damaged caused by political violence, or the breach of a power purchase agreement.
    Depending on perceived risks, loans are priced at favourable spreads above prevailing US Treasury Bill rates for various tenures. Typically, the term on Opic debt is between three and 15 years, but it can be expended to up to 20 years.
    But it also extends debt to emerging-market-focused investment funds able to match the Opic contribution with privately raised equity. For instance, it is close to finalising a $300-million ‘Global Renewable Resources’ disbursement, which could mobilise $1-billion in support of renewable energy projects in developing countries.
    Debt financing, however, remains the largest part of its current portfolio, at around $8,5-billion, with insurance comprising $2,3-billion and investment funds $2,7-billion.
    After Latin American and the Caribbean, sub-Saharan Africa is already the second-largest regional beneficiary of Opic development finance, comprising 18% of the overall portfolio.
    President and CEO Elizabeth Littlefield has stated that agency has three priorities in the territory, including support for renewable energy, a focus on infrastructure, especially for agriculture, and expanding access to finance for small and medium-sized enterprises.
    Since 1974, Opic has invested nearly $6,3-billion in 420 projects in Africa, while its current exposure amounts to nearly $3-billion across 109 projects.
    However, Moran stresses that the key to unlocking its favourable debt instruments lies in attracting US project sponsors to the continent, owing to the fact that Opic, which receives its authority from the US Congress, can only release funds to initiatives where an American company owns 25% of the equity portion.
    Opic, together with the US Trade and Development Agency, which scans the world for potential projects in which US firms can participate, is, therefore, seeking to expose American companies to some of the opportunities currently emerging in South Africa and on the rest of the continent.
    These opportunities, he says, cover sectors besides energy and infrastructure, and can include funding for small business, information technology programmes, food security, as well as hotel and leisure investments and manufacturing.
    But coal-related projects, which were previously a material part of Opic’s portfolio, are now more or less off limits, owing to the repositioning of its mandate to specifically support low-emission projects.
    Prevailing environmental guidelines also make it difficult for the agency to participate in certain chemicals projects, as well as in large-scale hydropower projects and any investment that could result in the displacement of US jobs, such as business process outsourcing, automotive investments and certain farming-related ventures.
    “My mission in South Africa is to expose the market to our products and, if possible, facilitate a matching of US project sponsors to specific investment opportunities,” Moran concludes.

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