Difference between revisions of "Mini-Grid Financing"

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== Overview<references /><br/> ==
 
== Overview<references /><br/> ==
 
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[[File:ProSolar Financing Handbook Cover.jpg|border|right|180px|ProSolar Financing Guidebook|alt=This guidebook|link=File:How do we finance it?.pdf]][[:File:How do we finance it?.pdf|This financing guidebook]]&nbsp;for mini-grid businesses was developed to provide guidelines<br/>and recommendations for securing various forms of financing for the most relevant types of mini-grid businesses and projects in [[Kenya_Energy_Situation|Kenya]].&nbsp;It serves to provide an overview of mini-grids and the key financing concepts and procedures that developers should consider when developing mini-grid projects.&nbsp;
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[[File:ProSolar Financing Handbook Cover.jpg|border|right|180px|ProSolar Financing Guidebook|alt=This guidebook|link=File:How do we finance it?.pdf]][[:File:How do we finance it?.pdf|This financing guidebook]]&nbsp;for mini-grid businesses was developed to provide guidelines<br/>and basic recommendations for securing various forms of financing for the most relevant types of mini-grid businesses and projects in [[Kenya Energy Situation|Kenya]].&nbsp;It serves to provide an overview of mini-grids and the key financing concepts and procedures that developers should consider when developing mini-grid projects. <span style="font-size: 13.6px;  background-color: rgb(255, 255, 255)">The handbook eases the&nbsp;understanding of the most relevant aspects of financing mini-grids and&nbsp;</span><span style="font-size: 13.6px">sheds light</span><span style="font-size: 13.6px">&nbsp;on the financing process, options and timings for project developers. It presents an overview&nbsp;of typical (simplified) investment cases, giving corresponding illustrations of tariff structures and key considerations for financing methods for each case.</span>
  
Successful financing of [[Category:Mini-grid|mini-grid]] projects requires an understanding of the relationships between different pools of money and diversifying investments to increase resilience and lower risks. Project developers are tasked with attracting the right type of investment depending on their business model and mini-grid stage in the funding cycle. Of importance is the understanding of the contribution and impact of the investors on the development of mini-grids.
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The guidebook is targeting <span style="font-size: 13.6px;  background-color: rgb(255, 255, 255)">(prospective) mini-grid developers who seek to get<span style="font-size: 13.6px;  background-color: rgb(255, 255, 255)">&nbsp;a general understanding&nbsp;of&nbsp;financing&nbsp;a mini-grid in Kenya, but can also serve as a reference to other stakeholders. It therefore offers a general introduction to mini-grid financing in Kenya and is not targeting mini-grid financing experts and companies already engaged with financing mini-grids.</span></span><span style="font-size: 13.6px;  background-color: rgb(255, 255, 255)">While this handbook intends to display the required knowledge for mini-grid financing, mini-grid projects are very site specific. ''The&nbsp;authors of this handbook, therefore, do not accept any liability for commercial or investment decisions taken on the grounds of the knowledge presented&nbsp;within.''</span><span style="font-size: 13.6px;  background-color: rgb(255, 255, 255)"><span style="font-size: 13.6px;  background-color: rgb(255, 255, 255)"></span></span>
  
<span style="font-size: 13.6px;  background-color: rgb(255, 255, 255)">This handbook, therefore, eases the&nbsp;understanding of relevant aspects of financing mini-grids and&nbsp;</span><span style="font-size: 13.6px">sheds light</span><span style="font-size: 13.6px">&nbsp;on the financing process, options and timings for project developers. It presents an overview&nbsp;of&nbsp;business&nbsp;models relevant for mini-grids as well as classic investment cases, giving corresponding illustrations of tariff structures and key considerations for financing methods for each case. Case studies which are drawn from micro-grid, mini-grid and small power distributors projects in Kenya showcase the application of illustrative tariff and financial models <span style="font-size: 13.6px;  background-color: rgb(255, 255, 255)">and spell out risk abatement&nbsp;alternatives for mini-grids</span>.</span>
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<span style="font-size: 13.6px;  background-color: rgb(255, 255, 255)"><span style="font-size: 13.6px;  background-color: rgb(255, 255, 255)"><span style="font-size: 13.6px;  background-color: rgb(255, 255, 255)">T<span style="font-size: 13.6px;  background-color: rgb(255, 255, 255)">he handbook is the most recent addition to a series of publications by [https://www.giz.de/en/worldwide/25332.html ProSolar] for mini-grid practitioners, coming after a practical guide to mini-grid<span style="font-size: 13.6px;  background-color: rgb(255, 255, 255)">&nbsp;[[:File:GIZ2014-en-where-shall-we-put-it-kenya.pdf|site selection]],&nbsp;[[:File:GIZ2016-ProSolar-Licensing-Guidebook.pdf|licensing]]&nbsp;and&nbsp;[[:File:Mini-Grid_Sizing_Guidebook.pdf|sizing]].</span></span></span></span></span>
  
The guidebook will be of interest to&nbsp;<span style="font-size: 13.6px;  background-color: rgb(255, 255, 255)">(prospective) mini-grid developers who seek to get<span style="font-size: 13.6px;  background-color: rgb(255, 255, 255)">&nbsp;a better understanding&nbsp;of&nbsp;financing&nbsp;a mini-grid in Kenya. I<span style="font-size: 13.6px;  background-color: rgb(255, 255, 255)">t may also serve as a reference to the overall business financing process and be&nbsp;</span><span style="font-size: 13.6px;  background-color: rgb(255, 255, 255)">a useful guide for regulators, bilateral and multilateral development partners, as well as&nbsp;</span><span style="font-size: 13.6px;  background-color: rgb(255, 255, 255)">investors seeking to gain insights on investments in the mini-grid sector in Kenya. T<span style="font-size: 13.6px;  background-color: rgb(255, 255, 255)">he handbook is the most recent addition to a series of publications by ProSolar for mini-grid practitioners, coming after a practical guide to mini-grid<span style="font-size: 13.6px;  background-color: rgb(255, 255, 255)">&nbsp;[[:File:GIZ2014-en-where-shall-we-put-it-kenya.pdf|site selection]],&nbsp;[[:File:GIZ2016-ProSolar-Licensing-Guidebook.pdf|licensing]]&nbsp;and&nbsp;[[:File:Mini-Grid Sizing Guidebook.pdf|sizing]].&nbsp;</span></span></span></span></span>
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<br/><span style="font-size: 13.6px;  background-color: rgb(255, 255, 255)">While this handbook intends to display the required knowledge for mini-grid financing, mini-grid projects are very site specific.&nbsp;</span>''The&nbsp;authors of this handbook, therefore, do not accept any liability for commercial or investment decisions taken on the grounds of the knowledge presented&nbsp;within.&nbsp;''
 
 
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== Table of Contents&nbsp; ==
 
== Table of Contents&nbsp; ==

Revision as of 07:39, 13 September 2017

Overview

This guidebook
This financing guidebook for mini-grid businesses was developed to provide guidelines
and basic recommendations for securing various forms of financing for the most relevant types of mini-grid businesses and projects in Kenya. It serves to provide an overview of mini-grids and the key financing concepts and procedures that developers should consider when developing mini-grid projects. The handbook eases the understanding of the most relevant aspects of financing mini-grids and sheds light on the financing process, options and timings for project developers. It presents an overview of typical (simplified) investment cases, giving corresponding illustrations of tariff structures and key considerations for financing methods for each case.

The guidebook is targeting (prospective) mini-grid developers who seek to get a general understanding of financing a mini-grid in Kenya, but can also serve as a reference to other stakeholders. It therefore offers a general introduction to mini-grid financing in Kenya and is not targeting mini-grid financing experts and companies already engaged with financing mini-grids.While this handbook intends to display the required knowledge for mini-grid financing, mini-grid projects are very site specific. The authors of this handbook, therefore, do not accept any liability for commercial or investment decisions taken on the grounds of the knowledge presented within.

The handbook is the most recent addition to a series of publications by ProSolar for mini-grid practitioners, coming after a practical guide to mini-grid site selectionlicensing and sizing.


Table of Contents 

Link of the guidebook: Mini-Grid Financing Guidebook

  1. Introduction 10
  2. Understanding Mini-Grid Financing 12

           2.1. Basic Finance Principles 12
           2.2. Corporate vs. Project Financing 14
           2.3. The Different Pools of Money in Global Finance 15
           2.4. Types of Financing and their Considerations 21
           2.5. Stages of Financing 23
           2.6. Types and Timing of Financing for Mini-grid Projects 28
           2.7. What Investors Value in Companies they Invest In 30

      3. Kenya Mini-Grid Market Overview 34

          3.1. Market size and relevant actors 34
          3.2. Framework conditions 35
          3.3. Financing Mini-Grids in Kenya 37

      4. Solar-Hybrid Mini-Grid Business Models and Cost-structures 40
         4.1. Case 1 - Micro-Grid 43
         4.2. Case 2 - Isolated Mini-Grid 47
         4.3. Case 3 - Small Power Distributor 51

    5. How to Apply for and Secure Financing for Mini-Grid Developers 56
        5.1. Financing Steps for Mini-grid Developers 57
        5.2. Challenges for securing finance 72

    6. Conclusion 73

    Annex 75


Further Information

This guidebook has been developed as part of a series of handbooks on mini-grids. You can access the other ones on the following web pages: