A wind farm. AFP PHOTO
A Sh100 billion ($1 billion) fund backed by the European
Investment Bank (EIB) has been set up to cushion investors in renewable
energy projects from unexpected losses in sub-Saharan Africa.
The
EIB has teamed up with the African Trade Insurance (ATI) and German
insurance firm Munich Re to create the fund that will provide insurance
against occurrences such as breach of contract, currency
inconvertibility, war and civil unrest that could trigger investor
losses.
“This exciting new partnership between the EIB,
Munich Re and ATI combines technical, financial and sector experience
and local knowledge essential to tackle investment barriers,” EIB
regional representative Catherine Collin said in a statement.
The
fund is set to help reduce African governments’ debt exposure since
they have often been forced to provide sovereign guarantees to investors
through letters of support that cushions private investors from
unforeseen political and economic risks.
Kenya,
which has issued such guarantees for renewable energy projects, has
booked them as national debt, pushing up the country’s debt stock.
Developers
of the defunct Kinangop Wind Park sued Kenya for Sh15 billion after the
Treasury-backed project collapsed under the weight of political
pressure.
“This (insurance) facility is particularly
important because it reassures financiers and investors in the energy
sector in Africa that their investments are fully covered and safe and
this eventually ensure the production of cheaper energy which benefits
the final energy users,” said Energy principal secretary Joseph Njoroge
during launch of the fund in Kilifi.
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