Strategic $1.3bn fund to interconnect Southern African transmission

Southern Africa’s Power Pool (SAPP) and Southern African Development Community (SADC) have appointed blended finance fund manager Climate Fund Managers (CFM) to manage its Regional Transmission Infrastructure Financing Facility (RTIFF).

The $1.3 billion target facility is focused on improving strategic interconnection and cross-border energy transmission in the Southern Africa region.

The facility, which launches with $20 million in commitments from SAPP, targets a first close of $500 million in 2025 to be raised from public and private sector investors locally and internationally, as well as a final close of $1.3 billion within 24 months. The facility will have a fund life of up to 20-25 years.

RTIFF will prioritise projects that focus on connecting currently unconnected SAPP members, help relieve congestion bottlenecks to regional electricity trading, promote inter-continental power trading through transmission corridors and support the adoption of new-generation renewable energy space in the region.

According to Climate Fund Managers, energy transmission infrastructure projects are notoriously high-risk and capital-intensive, making them challenging to fund independently through sovereign capital alone.

To battle this, the facility makes use of a blended finance model, utilising public capital to balance risk and enable private capital to enter.

The fund’s architecture follows the structure of CFM’s emerging market blended finance facilities Climate Investor One, focused on renewable energy generation and transmission, and Climate Investor Two, focused on water, sanitation and ocean infrastructure.

It will comprise a $100 million target ‘Development Fund’ to provide concessional capital and development expertise, including support on viability studies, legal and financial structuring, planning and ESG compliance.

It will also include a $1.2 billion target ‘Construction Fund’ that will make direct investments through the provision of construction financing and value-add expertise for transmission project builds.

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Improving transmission between member states

Victor Mapani, chairperson of the SAPP Executive Committee, said in a release: “The provision of sustainable power can be distilled into three activities: generation, transmission and distribution. While generation receives the lion’s share of attention, the importance of delivering that power to where it is needed is equally critical.”

The facility is hoped to improve energy transmission within and between the 16 SADC member states and with other power pools.

SAPP is a cooperation of 12 Southern African countries represented by their national power utilities and some private utilities under the auspices of the SADC.

SAPP members Angola, Botswana, Democratic Republic of the Congo, Eswatini, Lesotho, Mozambique, Malawi, Namibia, South Africa, Tanzania, Zambia, and Zimbabwe have already created a common power grid between their countries.

The SAPP also operates a competitive electricity market in the SADC region and the RTIFF will provide power companies and project developers working on transmission issues with access to patient capital and development expertise to establish strategic interconnections that allow for increased electricity trade.

Added Mapani: “Access to capital is the number one barrier facing developers of energy transmission infrastructure. RTIFF dismantles this by enabling the private sector to work alongside public sector utilities to roll out new transmission lines at scale.

“We are delighted to have appointed CFM with their strong track record in the African energy sector to establish and manage this innovative facility and to help our member states finally secure a sustainable, resilient energy supply.”

Stephen Dihwa, Coordination Centre executive director of SAPP, said: “Interconnection across SAPP via strategic transmission corridors can save the SADC region an estimated $37-42 billion in Net Present Value (NPV) by 2040. We have identified eight high-priority transmission projects for RTIFF that will bring economic benefits of $4.3 billion in NPV.”

Added Amit Mohan, head of Private Credit at CFM: “The lack of investment in grid infrastructure is one of the reasons for ongoing blackouts in many parts of Southern Africa…If we don’t invest in grids today, we will face gridlock tomorrow.

“This is even more pressing from an energy transition perspective as the world needs to embrace green electrons on the grid. CFM is proud to be associated with SAPP and appointed as the manager of RTIFF as there is a deep need to mobilise blended finance at scale and speed to enable the rollout of additional grid infrastructure in the region.”