This study is made possible by the support of the American People through the United States Agency for International Development (USAID). The contents of this case study are the sole responsibility of INVEST implemented by DAI and do not necessarily reflect the views of USAID or the United States Government.
In sub-Saharan Africa, an estimated 600 million people live and work without regular access to electricity. Power Africa, a U.S. Government initiative coordinated by USAID, aims to enable energy sector transactions between public and private investors to increase access to electricity across the continent.
By partnering with USAID INVEST, an initiative that mobilizes private capital to achieve development outcomes, Power Africa has increased access to solar home systems and mini-grids in areas across Kenya where access to grid electricity had previously been nonexistent or prohibitively expensive.
In Kenya, off-grid energy businesses have the potential to scale rapidly and reduce the energy gap for households and businesses in underserved areas. However, because these energy businesses do not have access to the expertise and support necessary to confront the complicated financial and business operational realities that accompany growth, they often fail to reach this potential.
INVEST, in collaboration with Power Africa and USAID Kenya, solicited proposals for targeted support from its specialized partner network, ultimately awarding a subcontract to CrossBoundary LLC and Open Capital Advisors. They identified four high-potential off-grid energy businesses with the intention of providing them with transaction advisory services required to raise capital to finance enterprise growth. They also identified a development finance institution (DFI) looking to set up an energy-focused debt facility.
By engaging transaction advisors, USAID can help off-grid energy businesses unlock the private capital they need to grow. With INVEST’s assistance, the selected energy companies have determined appropriate capital providers. Three of the companies have closed on transactions that raised growth and operating capital, and two of these companies are working on a second round of financing. The fourth company is making good progress on a deal. INVEST has also assisted the DFI in sizing the market and defining the appropriate structure and partners for its debt facility.
INVEST used a results-based contract in which the transaction advisors receive a portion of their fee based on transactions closed. Success fees help align business and development objectives (e.g. the amount of capital raised and the number of households connected).
Transaction advisors have the financial expertise and local contextual knowledge necessary to help enterprises determine and structure a best-fit financing solution that considers the company’s market, products, and business stage. In Kenya, transaction advisors identified financing options for solar home systems and mini-grid companies, which included local currency lending, blended and concessional capital, and syndicated loans.
In Kenya, Power Africa’s partnership with INVEST has exceeded targets for both capital raised and projected electric connections. To date, the INVEST transaction advisors helped the firms close debt and equity transactions totaling $63.25 million with over $136 million in capital projected to be raised by the close of the activity. As a result, four off-grid energy companies are on the path to growth and a new debt facility is ready to be launched.
INVEST has enabled these companies to provide a projected 390,000 new connections as well as 6,000 upgraded connections, and it anticipates mobilizing additional capital that will result in 50,000 more projected new connections.