OPIC's Global Energy Program marks its tenth year bringing electricity to underserved populations around the world
This year marks the 10th anniversary of OPIC’s Global Energy Program, established in 2007 to support projects to expand access to electricity, one of the world’s major development challenges. Over the past decade, the program has committed financing and insurance to 144 energy projects spanning traditional and renewable, from Asia to Africa, the Middle East and Latin America.
Lynn Tabernacki, Deputy Vice President of OPIC SME Finance, heads the Agency's Global Energy Program. Here she discusses the range of projects OPIC supports and the Agency's role in providing financing when it is unavailable from private lenders.
What types of energy projects does OPIC support?
The diversity of projects is what makes OPIC’s energy program so exciting. We have supported the full spectrum of energy projects, from upstream deals to utility-scale and off-grid power generation solutions. In the renewables sector, we have committed projects in solar photovoltaics, wind, biomass, geothermal, hydro, natural gas and energy efficiency in all parts of the world. This would include $12.4 million in financing for the Ndugutu small hydro project in Uganda, which will support the construction and operation of a 5.9 MW plant that will bring electricity to the rural part of a country where only 18 percent of the population currently has access to power.
In thermal power, we have supported multiple utility-scale power plants such as the Azura-Edo power plant near Benin City in Edo State, Nigeria. And, since a large portion of the world’s population lives far from a central utility grid, we have also focused on off-grid energy access by backing mini-grids, pay-as-you-go solar home kits, and solar rooftop projects providing reliable, affordable, and clean solutions. We recently committed $10 million in financing to Orb Energy for the expansion of its solar rooftop business serving commercial and industrial customers in India. We have provided funding to financial intermediaries directing downstream loans to renewable energy, and have also backed energy efficiency improvements to transmission and distribution networks, such as with our three loan guaranties totaling $145 million to the Jamaica Public Service Co., the Jamaican local utility.
Our work is very much demand-driven. As developers and entrepreneurs have cultivated projects that are creditworthy and impactful, we have found ways to assist them and will continue to do so.
What is OPIC able to provide American companies that the private market place cannot?
OPIC provides financing when sufficient financing is not available from the private sector. Energy projects require long-term investments of time and money. OPIC is able to leverage these investments by extending tenors for repayment up to 20 years. Without long-term financing from OPIC and other international finance institutions, these transactions would not be possible.
OPIC also plays an important role in helping American small- and medium-sized (SME) businesses enter and expand in emerging markets. These developers have limited financing opportunities from the private commercial banking sector. If a borrower is unknown to the local banks, the banks’ pricing and collateral requirements can be untenable for the project; and if a project does not meet a minimum deal size, it will not attract international lenders. For example, OPIC recently provided financing to the Proyecto la Trinidad project involving the construction and operation of multiple small-scale solar projects totaling 27 megawatts (MW) in El Salvador. The New York-based investor has gone on to advance additional, larger projects in the country. Additionally, a Washington, D.C. company developed a business model to provide financing to modest-sized companies involved in off-grid energy access. OPIC also provided financing to SunFunder, a San Francisco business that extends loans to help creditworthy businesses in developing countries that distribute off-grid energy solutions.
How have US companies benefited from OPIC support in the energy sector?
Our support for these projects has helped to create market expansion opportunities for U.S. businesses. We have seen that a large number of U.S. companies and private equity funds are actively engaged in global energy investment. OPIC uses its experience and creativity so that difficult deals in challenging markets can be accomplished. OPIC’s expertise is in navigating these markets. We work with sponsors and host governments to ensure that contractual arrangements are internationally bankable and that suitable legal and regulatory frameworks exist for the projects’ success. As I indicated above, we work in a broad range of sectors and an even broader range of countries. This means that the structuring of each deal is quite bespoke, so as to mitigate the specific risks.
Looking ahead to the next decade, what is the future of the Global Energy Group?
Of course, we will remain active in the mainstream clean energy generation business – large scale wind, solar, hydro, etc. because it is so highly impactful. Lately, we have also seen an uptick in the number of countries exploring gas-to-power options, as they recognize the necessity of affordable, baseload power for their electricity users. Not all countries have these options, but host governments are putting national energy strategies in place that take advantage of their country’s available resources and the growing liquefied natural gas (LNG) markets and import opportunities. Whether power generation projects use renewable energy or fossil fuels, OPIC will determine whether our participation is possible and relevant.
I see further growth opportunities in the area of commercial and industrial solar (C&I) in places where the existing grid cannot reliably serve the constant demands of businesses. These projects can move quickly with the right capabilities on the ground, and as long as regulations allow self-generation or net metering. We have developed a flexible financing model that supports business growth in this area, and so I envision employing this with a strong pipeline of projects in the next few years.
Finally, I expect that we will have a keen focus on off-grid opportunities. Not only are these projects critical from a development perspective, seeing how they are game changers by introducing electricity into daily living through lighting, cell phone charging, televisions, refrigerators, etc., but interestingly, off-grid projects are now recognized for a new importance. The lives of women are specifically and greatly improved when they can use electricity for cooking and for running businesses. Supporting women entrepreneurs is a key mission of ours, so providing electricity to this goal is a wonderful intersection of our various objectives.