Project detail - Ilute Solar Limited

Who is our prospective customer?

Ilute Solar Limited (the Borrower) is a Special Purpose Vehicle (SPV) holding the 25MWac solar power project developed by Serengeti Energy Ltd (https://serengeti.energy/) and Western Solar Power Ltd (www.buffaloenergy.co), both the Sponsors. Power will be sold under a 25-year Power Purchase Agreement (PPA) with GreenCo Power Services Ltd, acting as an intermediary off-taker that purchases power from Renewable Energy (RE) Independent Power Producers (IPPs) and sells that electricity to utilities and private sector off-takers via the Southern African Power Pool (SAPP).

What is our funding objective?

FMO is Mandated Lead Arranger for a debt package consisting of i) a senior debt tranche (sized conservatively assuming reduced market risk); ii) a senior tranche from the Sustainable Energy Fund for Africa (SEFA), managed by AfDB (same terms as senior debt with a concessional interest rate); and iii) a sub-senior tranche funded from Building Prospects, a government fund managed by FMO (assumes market risk and absorbs tariff fluctuations).

Why do we want to fund this investment?

In southern Africa, there is a clear trend of moving away from classical PPAs with government-owned utilities towards a regional merchant model. This has the potential to unlock vast new amounts of renewable energy in the region, as supply and demand can be balanced regionally, and the success of projects no longer depends on the performance of local utilities. Ilute is poised to be the first operational project to sell power on SAPP under a GreenCo PPA. Through the involvement of GreenCo, tariffs are stabilized within a certain bandwidth, avoiding pure merchant risk. The transaction will be labeled 100% Green and 100% Reducing Inequalities, and is an opportunity for FMO to mobilize approximately USD 18.5 million, of which USD 5 million will be from commercial banks.

What is the Environmental and Social categorization rationale?

This concerns an E&S B+ categorized investment, as the solar photovoltaics project comes with potential adverse environmental or social (E&S) impacts that extend site boundaries and might in part be irreversible, although they can be prevented and addressed through relevant mitigation measures. E&S characteristics of this investment include land acquisition and possible economic resettlement, as well as biodiversity impacts, together with health, safety and security issues during construction. The E&S context of the project will be taken into consideration through diligent siting, project design, local content planning and close engagement with project-affected communities. The project shows exposure to IFC Performance Standards (PS) 1 (Assessment and Management), PS 2 (Labor Conditions), PS 3 (Resource Efficiency and Pollution), PS 4 (Community health and safety, and security), as well as PS 5 (Land Acquisition) and PS 6 (Biodiversity). PS 7 (Indigenous Peoples) and PS 8 (Cultural Heritage) are deemed not applicable. Note that an Environmental & Social Action Plan will be part of the agreement.

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Date	Total FMO financing
10/14/2024	USD 11.50 MLN