SunFunder, a specialist solar finance company focused on emerging markets, announced the first close of its new $50 million "Beyond the Grid Solar Fund" last week. By offering new debt finance solutions to solar energy companies operating in countries including Tanzania, Kenya, Rwanda, and India, the fund will make it easier for these companies to serve many of the 1.2 billion people currently lacking access to electricity worldwide.
There are currently scores of solar companies providing beyond-the-grid energy solutions to people lacking electricity in Africa and Asia through distributed products and services, such as solar home systems that provide lighting and mobile phone charging. To date, these solutions have improved the lives of around 94 million people in Africa and Asia. The sector has attracted investments totaling more than $511 million to date, but the companies operating in this space need much greater sums of money if they are to reach the scale that would allow them to serve the addressable market. As a new report from Bloomberg New Energy Finance noted, "...a number of these companies have now reached the stage at which they are seeking triple-digit million dollar amounts in debt capital to finance an accelerated roll-out of their services."
Accessing large-scale investments has been a challenge for many of these companies due to a number of factors, including lack of track record and the fact that local banks are reluctant to invest in the sector. SunFunder's offerings are tailored to the off-grid solar sector and helps companies access debt capital for scaling up, including through specialist products that allow them to access larger investments.
Since 2013, SunFunder has provided more than 80 loans to 30 companies in Africa and Asia, allowing these companies to reach more customers. Their current goal is "to invest $1 billion into off-grid solar around the world by 2020 and to show that off-grid can be a true commercial investment opportunity." They're well on their way to this goal and maintain a 100 percent repayment rate to investors.
SunFunder is unique in that it's one of very few financial intermediaries with local presence and specialist expertise in solar in emerging solar markets. The first close of the new "Beyond the Grid Solar Fund," amounting to almost $21 million, will enable SunFunder to expand the inventory/working capital loans, receivables financing, and project financing it can provide to solar manufacturers, distributors, developers, installers, and retailers. Additionally, according to Ryan Levinson, SunFunder's Founder and CEO, "It allows us to expand some of our new financial products for the sector, such as SAFI [Structured Asset Finance Instrument], our structured receivables finance solution for pay-as-you-go solar companies, and move into commercial-scale project financings." This ultimately puts SunFunder on a pathway to scale and to unlocking large institutional capital for companies providing beyond-the-grid solar solutions.
Significantly, the anchor investors for the "Beyond the Grid Solar Fund" are the Overseas Private Investment Corporation (OPIC), MCE Social Capital, and the Rockefeller Foundation. The involvement of OPIC, the U.S. Government's development finance institution, is particularly significant; most of the debt SunFunder has raised to date has come from impact investors and concessional finance, while institutional investors have remained largely untapped.
OPIC's engagement with this fund is hopefully a sign of more engagement by institutional investors in the beyond-the-grid space in years to come. While OPIC has made a number of loans directly to companies in the past, this investment in SunFunder as an intermediary shows their commitment to building the ecosystem for beyond-the-grid solar.