Katharina Cavano l Palladium - Oct 13 2022
Palladium Designs Shell Foundation’s Energy Fund; DFC Invests $40M

Sub-Saharan Africa is home to 75% of the global population without access to energy. As those populations continue to grow, so too will their energy demands. Meeting the needs of the nearly 630 million people in the region without access to energy is a massive challenge, but not an impossible one.

Off-grid solar solutions are the answer. Innovative business models are entering the market with more frequency, offering a means to accelerate energy access and meet the growing demand for affordable and clean energy sources. From mini-grids of solar panels that power villages, to ‘plug and play’ solar systems and small solar lanterns for homes, the global demand for these innovations are there, but they require significant funding.

Shell Foundation, which has historically provided grants for access to the energy sector in Africa, found that many companies were struggling to move from their grant-funded start to the point where they were attracting more commercial investors. “In 2019, Shell set out to establish a fund that would focus entirely on this issue, and they hired us to help think through what that fund would look like exactly,” explains Palladium Managing Director Steven van Weede on the creation of the Energy Entrepreneurs Growth Fund (EEGF).

“We built a financial model to help us understand the economics of this type of fund and conducted pre-marketing to test investor appetite.”

He adds that once the framework of the fund was designed, he and the team conducted the selection process for the firms that would manage the fund moving forward and supported with the marketing to attract investors to the fund. “At that stage, Triple Jump and Persistent had made the fund their own, which is exactly how it should be. It has been a pleasure working with them, and supporting the implementation of the fund, and further capital raising".

“At an early stage, we identified the U.S. International Development Finance Corporation (DFC) as a likely investor and brought them to the table. Then early last year, DFC and Shell Foundation signed a strategic agreement,” van Weede explains. “Out of that agreement came the exciting announcement that DFC is investing US$40 million into the fund.” This brings the commitments of investments up to US$106 million in the fund and growing.

“These early stage companies aren’t able to bear a lot of debt, and not only is the funding of EEGF critical, but so is the flexible structuring of mezzanine finance, which has characteristics of both equity and debt financing. These bespoke transactions meet the requirements of the small businesses’ unique situations.”

Van Weede adds that the fund will finance more than 25 companies through tailored solutions to meet the changing needs of growing energy companies. With a fund life of 12 years, EEGF provides a longer investment holding and support period, recognising the inherent need for such businesses in emerging economies to unlock value creation to their stakeholders.

“Systematically, having funds like EEGF proving that investing in these early stage businesses, and specifically in an industry that’s still out there proving itself, helps move the industry forward, both in terms of the energy industry and early stage investing in emerging markets more broadly.”

For more information, read the press release or contact info@thepalladiumgroup.com.