Enabling renewable power generation
We have been working with emerging markets specialist Frontier Energy since it launched its first fund, in 2011. In total, we’ve committed a total of $22 million to the first-time fund as a cornerstone investor. This has enabled Frontier to successfully invest in a range of renewable energy projects – solar, geothermal, wind, and hydro power – that are now getting off the ground throughout Uganda, Kenya and Rwanda.
Anders Hauch, Investment Director, Partner and Co-Founder of Frontier, talks about the importance of having a heavyweight investor on side in the early stages of these projects.
An active investor
Anders says that throughout our investment, he and his team have valued our input and close support. “From the start, CDC was a very active investor and provided a lot of support, particularly with governance, and when things didn’t pan out exactly the way we intended. It was always good to hear their opinion, and also to hear their thoughts on what other investors would think of certain things.”
Stepping in when needed
Anders recalls the key part we played in getting the fund’s environmental and social management system off the ground, along with six other development finance institutions (DFIs), and also the time we supported Frontier when another investor defaulted on its first fund. He says: “It was a big help. We were just at our minimum close, and CDC took it on. It was really good that it could step up like that.”
Launching Frontier Energy II
We helped Frontier Energy to get its second fund, Frontier Energy II, off the ground too, initially by taking the proposal to other DFIs, including Proparco (France) and FMO (Netherlands). Anders explains, “They also made introductions to non-DFI investors, including a South African private investment fund. A lot of the investors we approached wanted to talk to our existing investors, and CDC is one of the most interesting to talk to because they’ve known us for several years.”
Africa is a challenging place to launch renewable energy projects. The sector is still in its infancy and consequently suffers from a lack of long-term investment – primarily because many investors are reluctant to take on the risks associated with early-stage project development.
Cutting through the noise
Anders says, “It is difficult and projects get delayed, but the fact that CDC knows the space and knows that these projects take time is definitely helpful, particularly in communicating how things are going on the investment side. The team is able to cut through the noise.”
“It also helps to have CDC round the table, both as a cornerstone investor, and as a large investor. It gives us a lot of credibility in the eyes of other investors – particularly in understanding market difficulties. When CDC speaks, everyone keeps calm! And on a personal level, the team are really good fun – there’s a lot of mutual respect, so 10 out of 1o for that.”
Anders Hauch, Investment Director, Partner and Co-Founder, Frontier Energy