Project detail - Alcazar Energy Partners II SLP

Who is our customer

The Alcazar Energy Partners II Fund (AEP II or the Fund) is a private equity fund targeting renewable energy generating projects and associated infrastructure in the Middle East, North-Africa (MENA region) and Eastern-Europe and Central-Asia (ECA region). The Fund is managed by Alcazar Energy and is expected to reach first close in 2022. In addition to FMO, it is expected that commercial investors and other development finance institutions will also invest in the Fund. AEP II is the second investment vehicle of the fund manager Alcazar Energy after the successful realization of their first renewable energy vehicle (AEP I).

What is our funding objective?

The Fund targets investments which deliver social and environmental benefits as well as financial returns. The investment mandate is focused on renewable energy projects; the majority of projects being grid-tied. In addition, a minority of the funds may also be invested in renewable energy projects that deliver electricity to desalination, irrigation and/or green hydrogen projects. Compared to AEP I, which focused pre-dominantly on the MENA region, AEP II will broaden its geographic focus to include the ECA region.

Why do we fund this investment?

By investing in the Fund, FMO seeks to address the market need for energy in the MENA and ECA region in a sustainable and responsible manner, by increasing the production of clean, renewable energy. A small part of the funding will be used for projects in an early development stage; typically a stage for which there is a scarcity of high-risk capital and where FMO’s capital will be truly additional. A successful final closing of the Fund means that more risk capital is available for renewable energy and clean technologies, which is fully in line with FMO's investment strategy.

What is the Environmental and Social categorization rationale?

The Fund’s primary focus will be on utility scale greenfield wind and solar projects (A or B+). However, the Fund may also invest a minority of its funds in other bankable technologies including run-of-river hydropower projects where inherent potential risks and impacts would need to be managed. The fund manager has experience with wind and solar plants, but not yet with hydropower or with investing in the ECA region. Investing in the ECA and MENA regions means dealing with contextual human rights issues. Therefore, the E&S classification of this fund is A. Key risks include biodiversity impacts, occupational and community health and safety, contextual risks and potentially land resettlements. This will be confirmed by asset specific Environmental and Social Due Diligence (ESDDs), focusing on IFC Performance Standards as well as contextual risks and climate resiliency that will stipulate stringent IFC PS-based mitigation and compensation measures as required for sound E&S performance. The Fund manages E&S risks and impacts through a mature and IFC PS-aligned Environmental and Social Management System (ESMS). The Fund also has established proper ESG reporting procedures and will closely monitor and manage E&S risks and impacts to secure net positive results or potentially proper compensation in line with Good International Industry Practices. Further, FMO will actively engage with the Fund in an effort to identify and materialize asset-specific value add opportunities, including CSR initiatives.