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Convergence

CrossBoundary Energy Case Study

CrossBoundary Energy is dedicated to financing on-site solar generation for commercial and industrial businesses in sub-Saharan Africa – a critical development need that is systemically under-financed. CrossBoundary Energy finances the construction, operations, and maintenance of solar projects, and is repaid through the sale of electricity to businesses or through lease arrangements. Their fund, Cross Boundary Energy 1 (CBE), has an innovative two-tier equity capital structure. The United States Agency for International Development (USAID), through CrossBoundary, contributed a small junior tier of funding to CBE (subject to first losses) to catalyze private investment into the larger senior tier. CBE invests its equity through special purpose vehicles (SPVs) that can also raise debt to increase total capital available for projects. CBE targets both financial returns and positive environmental impact for investors, while aiming to establish commercial and industrial solar as an investable asset class in sub-Saharan Africa. CrossBoundary Energy has a prospective pipeline of USD 100M+ in opportunities.

CrossBoundary Energy’s design and fundraising experience presents useful insights for others looking to create or invest in similar vehicles, including: i) Risk mitigation provided by subordinated capital is particularly important when investing in unproven sectors important for development, ii) Building a track record with aid agencies and identifying alignment with aid agency objectives helps secure funding, iii) Deal sponsors should be aware of the often complicated requirements associated with aid agency funding, as well as the time required to finalize blended finance structures, iv) Deal sponsors should be wary of introducing additional, unnecessary complexity into structures, v) Aid agencies can provide valuable support beyond subordinated capital, such as signalling credibility and facilitating connections to relevant partners.

Date: 2016
Type: Case Studies
Region: Sub-Saharan Africa
Sector: Energy and Climate Change
Language: English