Luca Matrone on Climate Investment Platform for Africa

Urgent action is needed to keep up with increasing worldwide demand for electricity. This will require an investment of $131 trillion in renewables by 2050, according to the International Renewable Energy Agency (IRENA).

That need is particularly acute in Africa, where by 2030 more than 600 million people will be living without electricity – 36 per cent of the population.

Last year, when Bentoe Tehoungue, Director of Family Health at Liberia’s Ministry of Health, sent out an email asking for help in facing the Covid-19 pandemic, her principal request was for electricity. Health workers all over Africa are using unreliable and even dangerous sources of light, postponing diagnosis and critical treatment or sending patients away.

Until a solar power project helped out, the Community Secondary School Ebenebe in Nigeria was without access to electricity for years, selling palm fruits in order to rent a generator to allow final-year students to carry out practical computer exams.

There’s no doubt that renewables need to be the answer to Africa’s rising energy requirements. It is the second most-inhabited region in the world after Asia and the fastest-growing continent in demographic terms. By 2030, more than 50 per cent of the population will be living in cities.

While African economic growth is projected to accelerate, it’s not yet enough to address the structural challenges.

That’s why Intesa Sanpaolo has become the first Italian bank to join the Climate Investment Platform (CIP), which brings together public and private financial institutions to support the implementation of renewable energy projects around the world.

CIP is indeed a partnership between:

• the International Renewable Energy Agency (IRENA);
• Sustainable Energy for All;
• the United Nations Development Programme (UNDP) and
• the Green Climate Fund.

It works to scale up financing to assist countries – particularly developing regions such as Africa – in achieving ambitious climate goals.

IRENA works with 180 countries to support a sustainable energy future. Under the CIP; Intesa Sanpaolo will offer its international experience in financing the construction of large-scale clean energy installations; together with its network of relationships in the major capital markets and the assistance needed to ensure the bankability of projects that meet the highest ESG criteria. 

The sustainable projects of Intesa Sanpaolo

The Intesa Sanpaolo Group has been widely involved in Africa; thanks to transactions done in Kenya; Cameroon; Angola; Egypt; Ethiopia; Zambia; Ghana; Uganda; Algeria; and Côte d’Ivoire.

The bank has also already taken part in sustainable projects in the continent. In 2017; it helped with the financing of the Koysha Hydroelectric Project; a hydropower plant in Ethiopia; as part of a long-term plan for five such plants in the Omo/Gibe river basin. The Koysha plant is designed to generate 6;460 GWh of electricity per year – as well as avoiding 1 million tonnes of CO2 emissions annually.

The relevance of working on a single platform

Luca Matrone’s statements

The CIP is a way to consolidate the bank’s work and connect it with like-minded partners in a coherent manner. “Through a single platform; governments; intergovernmental organizations; developing agencies; IPPs and banks will have the means to connect to foster renewable investments. It’s really important that all the relevant parties are linked on a single platform and not working in isolation”; says Luca Matrone; Intesa Sanpaolo’s Global Head of Energy Industry; Global Corporate Department; IMI Corporate and Investment Banking Division.

Additionally, says Matrone “It might be a good way of screening projects and also an important way to speed up access – that’s necessary to ensure change happens”.

This is particularly pertinent in the African market; says Matrone; where there is a heightened sense of both real and perceived risks. While many African countries have already made some progress in taking the necessary steps towards scaling up renewables; there is some way to go.

“For example – adds Matrone – regulatory frameworks are yet to achieve the level of autonomy and independence required to enforce regulation or sometimes lack the depth of technical expertise required to develop and implement new regulations”. The absence of an appropriate regulatory framework can significantly disrupt project development.

There are also other local or country-specific risks to consider; according to Matrone; such as:

• political risks (civil disturbance; expropriation; non-transferability; changes to the tax regime; etc.)
• risks related to logistics
• inadequate grid access.

Above all; there is the offtake risk related to the capacity of the public sector power company to consistently pay for the electricity generated during the life of the power purchase contract. Governments; international organizations and the private sector must work together to manage and effectively mitigate these issues.  

Since 2018; Intesa Sanpaolo has also been involved in the RES4Africa Foundation; a private-sector organization that provides a bridge between members and partners to encourage the use of renewable energy sources to power the development of African economies.

Closing the African energy gap will require significant additional renewable energy systems capacity and private-sector funding.

In 2019; RES4Africa launched the renewAfrica Initiative; a platform that brings together more than 25 players in Europe’s renewables industry – from operators; manufacturers; public and private financial institutions to industry associations and think tanks.

Participants on the platform are focused on scaling up access to renewable energy at a transformative scale across Africa; as well as building on best practices and providing a “one-stop shop” for support. Intesa Sanpaolo has been heavily involved in this effort as the co-lead; alongside the European Investment Bank; of a task force within the initiative that is working on determining potential improvements to existing financial instruments to facilitate the increased flow of private capital. 

Involvement in CIP and similar initiatives ties in with Intesa Sanpaolo’s plan to become the “first impact bank in the world” – an ambition driven by global trends such as climate change; ageing demographics and digitalization.

“It could be a real opportunity here to deploy capital in these countries to support sustainable growth” says Matrone. “But; more importantly; it’s also something we have to do to attain the targets needed to avert climate change; which is already having significant adverse impact in various parts of Africa”.