CrossBoundary Energy exits its first fund, raises US$40M to scale financed solar for businesses

AFRICACrossBoundary Energy (CBE), a direct investment arm of CrossBoundary that finances solar projects in Africa, has exited of its first fund at a 15% net Internal Rate of Return (IRR) to investors.

In addition, ARCH Emerging Markets Partners’ Africa Renewable Power Fund (ARCH ARPF) has provided US$40m in new equity funding to exit initial investors and support CrossBoundary Energy to continue to develop, construct and operate distributed commercial & industrial (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.

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.

“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 – CIO, CrossBoundary Energy

Instead, customers enter into long-term solar service agreements under which CBE (in partnership with local developers and solar contractors) finances, installs and operates solar assets to provide customers with cleaner and cheaper power.

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 US$57M in assets, serving 20 customers across 8 countries in Africa, including more than 40MW of fully financed solar PV and 10 MWh of battery storage projects.

“We are incredibly grateful for the early stage backing we received from our partners and investors such as Blue Haven Initiative, Ceniarth, Slocum Investments, Treehouse Investments and others, who trusted in our vision to bring cheap, clean energy to businesses across the continent and continued to support and work with us to realise that vision,” Pieter Joubert, CIO, CrossBoundary Energy, said.

“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.”

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 US$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 6.0x. At the close of this transaction, this leverage increased to more than 30x and USAID’s blended finance contribution of US$1.3M has now been repaid to the US Treasury with a return of 5%.

CBE1 also benefited from 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.

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