PHOTON International The Photovoltaic Magazine

UNEP funds projects from renewable energy enterprises

A United Nations Environment Program (UNEP) program in Africa to provide seed money to small private-sector energy companies based on renewable energy technologies will soon start funding several projects.

Since it began last summer, the African Rural Energy Enterprise Development (AREED) program has had 120 contacts, with roughly one-third dealing with photovoltaics. About 15 projects are scheduled for start-up funding by the end of the year, says Eric Usher of UNEP's Division of Technology, Industry and Economics in Paris. Another 15 projects are planned to go online next year.

Among the first five, which should be approved for working capital by the end of March, is an established electronics enterprise (which Usher declined to name due to ongoing negotiations) seeking to expand its urban-based PV business into the three unelectrified rural regions of Mali. Despite the company's respectable record, it has not been able to raise sufficient capital to expand into the PV market. A business plan has been received and discussions are underway to link AREED participation to bank co-financing, with AREED guaranteeing 30 cents for every dollar put up by the bank for loans to the company's customers.

The $2.5 million USD financing for AREED is being provided by the United Nations Foundation, a $1 billion philanthropic program set up in 1997 by Ted Turner, founder of the CNN news network, to support UN economic, social, environmental, and humanitarian causes. Usher says UNEP hopes to announce an increase in available funds in the next few months. Under AREED, companies will receive an average of $100,000 – in some cases, up to $250,000 – either as low-interest loans or in exchange for selling part of the new venture's equity. Usher says this is better than offering subsidies because it makes the enterprise more attractive for future bank loans.

Usher believes AREED, which also offers a training program for prospective entrepreneurs, should reduce the normal default rate of start-up companies from 80 to 50 percent. AREED, which currently operates in Botswana, Ghana, Mali, Senegal, and Zambia, plans to expand the program to developing nations worldwide, with South America coming on board by the end of the year.

UNEP Eric Usher,
phone: +33/1/4437-1429,
eric.usher@unep.fr