Largest ever sub-Saharan solar project

Angola is Africa's seventh largest nation with 30 million inhabitants and a rapidly growing economy. While the country is largely dependent on fossil fuels for its electricity generation, a new solar project – the biggest of its kind in sub-Saharan Africa, with seven facilities totalling 370MW – will greatly increase the share of sustainable energy and facilitate the switch to renewable sources.

Eighty-five percent of the project is financed with an export credit worth 560 million euro with a tenure of 18 years from the Swedish Export Credit Corporation (SEK), guaranteed by EKN and arranged by ING Bank. The project fits the recently raised ambitions of the Swedish export finance system to help combat climate change and support sustainable investments using Swedish greentech.

“Climate awareness is rapidly increasing in the financial markets and the export finance system strives to be a positive force in the transition,” says Anna-Karin Jatko, Director General at EKN.

This landmark project will have a huge societal impact on Angola and significantly increase the country’s share of renewable energy. It also fully supports the UN's Sustainable Development Goal 7 of ensuring that all people have access to affordable, reliable, sustainable and modern energy. 

“The project in Angola is a milestone within renewable energy and fits perfectly into our framework of green bonds which is linked to the relevant taxonomy,” adds Per Åkerlind, Executive Vice President at SEK, who notes a constantly growing interest from institutional investors worldwide: “The supply side, specifically in the Swedish market, is currently far too thin to satisfy the exponentially growing demand for green investment. As a result, green bonds issued by SEK in the Swedish market is at lower borrowing cost compared with non-green bonds. SEK is transferring that lower borrowing cost by giving green loans more favourable interest rates that make renewable energy even more competitive. We also make sure that the Swedish export credit system is aligned with the Paris 1.5-degree agreement.”

The international market for green bonds has only existed for some 12 years, but already around 15 percent of the Swedish corporate bond market is made up of green bonds, compared with 3–4 percent worldwide.

Triple-A backed

At ING Bank, Ron Hansen, Managing Director Export Finance, confirms that the Angolan government benefits from the strength of the triple A-backed Swedish export credit system in obtaining terms and conditions that would be nearly impossible to get elsewhere:

“In general, projects of this size in developing markets are not possible to finance in a ‘normal’ banking environment.”

Acting as arranger suited ING Bank perfectly, Hansen explains: “We have a very strong focus on sustainability and this project fits neatly with that. The project truly is a landmark sustainable transaction that is also very beneficial from an economic perspective for Angola as it substitutes the import of expensive diesel and saves foreign exchange.”

Responsible for structuring the loan and drawing up the documentation, ING Bank also helped to ensure that the wording and clauses of the loan agreement adhered to green loan principles, which made it possible for SEK to include the project in their green issuance.

“ING appreciates the business focus and can-do attitude that characterise the cooperation with EKN and SEK. It is great to see the coordinated Team Sweden approach – where EKN and SEK team up together – which proved to be very effective in practice,” says Eugène Kock, Director Structured Export Finance.

The EPC contractor behind the project is Portuguese MCA, but the initiative originated with the US renewable energy developer Urban Green Tech’s subsidiary Sun Africa, who turned to ABB Hitachi Power Grids for feasibility studies and possible sourcing of the technical solution including design, engineering and equipment.

Angola is a huge country, where Hitachi ABB has a strong local presence. The main grid runs along the coastline, leaving the rural inland areas with smaller local grids powered by diesel aggregates. “Replacing them with solar-powered microgrids will have a great impact on local communities and quality of life,” says Tony Moberg, Manager Tendering & Sales at Hitachi ABB.

Carbon-free future

Studies indicate that only 0.18 percent of the Angola’s energy needs are currently met with solar power, the bulk coming instead from hydro and fossils. The country is ripe and ready to harness the power of the African sun whilst contributing to a carbon-free future.

“We are contributing pioneering technology to enable MCA to integrate more renewables and electrify rural areas, whilst maintaining a stable network. Our role is to develop the project from idea to energization – ultimately, shaping a reliable and sustainable energy future for Angola,” Moberg adds.

Almost 1 million solar panels for in all seven sites will be manufactured in South Korea, while most equipment and transmission solutions will be shipped from Sweden. To be eligible for support from EKN and SEK, however, the Swedish content of the project had to be larger than what the deliveries from Hitachi ABB totalled.

“Hitachi ABB Power Grids supported the developer in achieving the Swedish interest required to enable an attractive Swedish export credit with Hitachi ABB as the anchor supplier. To up the number of Swedish suppliers involved, Hitachi ABB turned to Swedish trading house Elof Hansson,” says Tommy Östling, Senior Customer Finance Advisor.

Elof Hansson specializes in facilitating international projects and has relations with smaller and midsized companies across a wide range of industries.

“We were tasked with identifying and sourcing suitable suppliers who could meet project needs on commercially competitive terms in areas ranging from cables, building structures and furniture to tools, fences, security equipment and meteorological equipment. We expect that some 15–20 Swedish suppliers will deliver products and services to the project,” says Björn Olausson, President of Elof Hansson International.

Completion of the seven solar sites in Angola is expected by 2022. Eighty-five percent of the project is financed by EKN and SEK, and the remainder by the Development Bank of Southern Africa (DBSA) also arranged by ING Bank.