Rural electrification. Renewable energy  N/A



Support of Rural Electrification Funds as financing tools for Rural Electrification - pipeline filling in SHP, bio-energy, PV-diesel systems

Country : Madagascar. .
Client : ADEME - French Environment and Energy Management Agency . AFD (French Development Agency)
Start Date : November 2010
Completion Date : September 2011
Value of services : 113 000 €
Funder : ADEME (French Environment and Energy Management Agency) . AFD (French Development Agency )
Associate/Partner : ATW Consultants Madagascar
Description :
The National Electrification Fund (FNE) was created by the Malagasy Government to finance rural electrification projects. The FNE centralizes the national dedicated funds (State, JIRAMA - national utility), with the possibility of attracting the contributions of diverse financial partners (private operators, local banks, private investors, donors).

The FNE has a key role to play for the financial coordination of all projects dealing with rural electrification. After discussions held in the framework of Club ER, PERER (Program of Rural Electrification from Renewable Energy Sources) and ADER are considering an institutional and fiscal evolution in terms of financing Rural Electrification projects via FNE.

The new “FNE” will be an independent financial company able to attract diverse funds to finance, under the form of subvention, loans and/or guarantee, those rural electrification projects.

Among the main recommendations following the strategic reflexion of AFD, one consisted in the structuralization of Rural Electrification Funds to make them pull a leverage mechanism. AFD in accordance with ADER propose to launch a study focused on the concrete case of Madagascar.
Description of the Actual Services Provided IED has been assigned to provide its services as Technical Assistant in the following activities:

1. An assessment of the potential rural electrification projects in Madagascar which could be financed by the FNE, by categorizing these projects according to their degree of maturity, their geographical zone, the type of Renewable energy technology (Hydroelectricity, PV and Biomass) and service, the type of investors and operators. A particular attention was given to the side measures necessary for their realization.
From this pipeline, the experts’ team established a sample of projects likely to show that a simple policy of subsidy of the costs of connection for the user would strongly improve the impact of the public financing. This sample served as base for the continuation of the study.

2. An estimation of the required and financing for the projects: mixing donations / loans, maturity and methods of financing, set up of guarantees.
A simulation of cash flow of the FNE was developed, as an example, for the sample of projects retained, by simulating the repayments from the FNE to the Sponsors (investors, lenders) and the repayments of the project initiators at the FNE.
The hypotheses on the conditions for which the FNE could obtain credits or guarantees were defined on the basis of data collected from the AFD. The possibility of couplings loans / subsidies was taken into account (example of “pooling mechanism“ of the European Commission).