CrossBoundry Energy’s recent success story points to an exciting opportunity for distributed solar to provide more reliable and affordable power to African businesses and a powerful demonstration of the potential of blended finance to unlock new and impactful asset classes.
Launched in 2015, CrossBoundry Energy is one of sub-Saharan Africa’s leading investment platform for commercial and industrial (C&I) solar. The company has announced its first fund exit at a 15 percent net internal rate of return to investors.
ARCH Emerging Markets Partners’ Africa Renewable Power Fund (ARCH ARPF) is providing $40m in new equity funding to exit initial investors and support CrossBoundary Energy to continue to develop, construct and operate distributed C&I solar projects that will provide businesses across Africa with access to cheaper, cleaner power.
This exit and new investment is a powerful endorsement for the role of distributed renewables in Africa and the potential of blended finance in unlocking new asset classes.
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Over the last five years, CBE has pioneered the creation of a C&I solar sector in Africa. CBE’s solar-as-a-service model allows corporate customers to avoid the upfront capital expenditure and technical risk that can be a barrier to solar adoption.
CBE signed the first distributed solar power purchase agreements with corporate customers in Kenya, Rwanda, Ghana, Madagascar, Uganda, Sierra Leone, Zambia and Nigeria, and has built a strong client base with both multinational companies, including Unilever, Diageo, Coca-Cola distributors, Rio Tinto, Heineken, AB InBev, Actis, and leading local companies including Kasapreko and Xflora Group.
CBE is now operating or delivering $57m in assets, serving 20 customers across 8 countries in Africa, including more than 40 megawatts (MW) of fully financed solar PV and 10 MWh of battery storage projects.
The exit of CrossBoundary Energy I (CBE1) is also a powerful demonstration of the potential of blended finance to unlock new and impactful asset classes. CBE1 was closed in November 2015 as Africa’s first dedicated fund for C&I solar.
It was also a prototype for a new blended finance approach to renewables in Africa. USAID’s Power Africa initiative contributed $1.3m in the form of a repayable grant to catalyse private investors into the fund. USAID’s subordinated equity contribution attracted additional equity investors, effectively resulting in leverage of matching private capital of more than 6 times.
At the close of this transaction, this leverage increased to more than 30 times and USAID’s blended finance contribution of $1.3m has now been repaid to the US Treasury with a return of 5 percent.
CBE1 also benefited from the grant support from OPIC (now the US International Development Finance Corporation) and the Shell Foundation, in partnership with the UK’s Foreign, Commonwealth & Development Office, which allowed the fund to scale its operations.
“In terms of what comes next, partnering with an industry-leading investor like ARCH ARPF highlights the proven viability of captive commercial and industrial solar projects in Africa,” Pieter Joubert, chief investment officer, CrossBoundary Energy said.
During its early stages, CBE received support from some partners and investors such as Blue Haven Initiative, Ceniarth, Slocum Investments, Treehouse Investments and others. These investors see opportunity in C&I solar sector and trusted in the CBE’s vision to bring cheap, clean energy to businesses across the continent.
According to Joubert, this commitment by ARCH ARPF represents the next phase of a larger $100m transaction which will allow CBE to take the C&I sector to scale across Africa and in doing so, further reduce energy costs “for our customers, create additional jobs within the solar sector, and significantly reduce carbon emissions.”
For Mark Carrato, coordinator of the U.S. Government-led Power Africa initiative, “power Africa supports enterprise-led market innovations to address Africa’s energy challenges. CrossBoundary Energy’s model of distributed renewables to accelerate access to cheaper and cleaner power is an excellent example of this.”
Carrato said in 2015, Power Africa made a repayable $1.3 million first-loss grant contribution to catalyse the creation of the CrossBoundary Energy I Fund. While the grant initially unlocked six times that amount in matching private capital, it has now leveraged 30 times “our contribution from private investors. Moreover, the initial $1.3 million-plus 5 percent interest has been returned to the U.S. Treasury.”
