001/Ami/Sdg Fund-Fier/2024/Integrated Financing for Renewable Energy Tender, Madagascar - 95610986

Procurement Summary

Country : Madagascar

Summary : 001/Ami/Sdg Fund-Fier/2024/Integrated Financing for Renewable Energy

Deadline : 18 Mar 2024

Other Information

Notice Type : Tender

TOT Ref.No.: 95610986

Document Ref. No. : UNDP-MDG-00225

Competition : ICB

Financier : United Nations Development Programme (UNDP)

Purchaser Ownership : Public

Tender Value : Refer Document

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Tender Details

Call for expressions of interest (AMI) FIER Project: "Integrated Financing for Renewable and Sustainable Energy" Reference: 001/AMI/SDG FUND-FIER/2024 As part of the implementation of the "FIER" project financed by the Joint Fund of the United Nations for the Sustainable Development Goalsthe, UNDP and UNCDF invite interested companies to respond to the call for expressions of interest "Access to concessional loans, guarantees and additional subsidies for the financing of renewable and sustainable energy projects in Madagascar" below . The objective is todevelop a financing line for sustainable energy, clean cooking and energy efficiency projects in Madagascar. Available funding is detailed below. 1) Summary of the program Despite its strong potential in renewable energies, Madagascar, like the majority ofhe developing countries are characterized by an underdeveloped energy sector that is vulnerable to exogenous shocks and climate change. Madagascar has a low electrification rate of 26%, a low rate of access to electricity (35.1%) according to the latest estimates from the Banth world, distributed disproportionately between urban areas (60%) and rural areas (15.1%) in 2022. In 2017, the country had an installed electricity generation capacity of only 400 MW, mainly thermal ( 53%), hydroelectric (39%) and solar (1%). Moreover, more than 92% of Malagasy households depend on firewood, charcoal and other biomass to meet their cooking energy needs. In 2018, only 0.6% of Malagasy households used clean fuels and only 0.3% of them used improved cooking ovens.res. Madagascar has lost more than 90, 000 ha of forests per year over the last decade due to deforestation due to conversion into crop areas, mining operations and the high demand for energy wood. These energy challenges constitute a major obstacle to economic development.e and social, increase the pressure on deforestation and have a negative impact on the health of the population. Despite this, investors in the strategic sustainable energy sector are showing growing interest in a dynamic, high-impact but undercapitalized market. As part ofhe Joint SDG Fund program "Transforming the financial system to support the development of sustainable energy solutions through technical assistance and investment (A Financial Innovation System for Energy)", UNCDF and UNDP are implementing a DDerisking facility aimed at providing capital to companies that are ready to invest but have difficulty raising capital on the market because they operate in sectors and/or areas that are perceived as too risky by the traditional investors.The aim is to enable private companies to demonstrate that they can be reliable partners for traditional investors, either early in the de-risking process or at a later stage, taking into account the specific circumstances and the level dhe risk that investors are willing to accept to achieve the strategic objectives of the project. 2) Description of the Derisking Facility: The Derisking facility, will provide: a) Risk reduction capital in the form of concessional loans or guarantees, and b) Performance-based supplementary grants (PBP): These are grants intended to support projects and companies that have difficulty obtaining financing on the market, by offering them financial conditions adapted to their needs. Note that only fun projectsrural triification (solar home systems, small/minigrids, nanogrids), clean cooking projects (improved cookstoves, bioethanol, green charcoal) and energy efficiency projects will be able to benefit from this PBP. Below are detailed descriptions of fina instrumentsnciers that interested companies could claim: ● Cash flow facilities: Loans i. Working Capital Loans: These loans finance short-term working capital needs and may come with a grace period or soft pricing.xible (for example, a concessional interest rate) that meet the needs of the business or project. ii. Extended Grace Period Loans/Long Term Loans: These loans provide extended grace periods for interest and/or principal (e.g. up to 3 years), or ofhave long lapse profiles, and can be useful if liquidity is needed for medium- or long-term investments. Extended grace periods and long-term loans are another form of concessionality, beyond concessional interest rates. LoansSubordinated: These loans provide a financing solution that is subordinate to the repayment rights of other lenders who may have a higher ranking. If the borrower cannot repay, it is the subordinated loan that would be first exposed to losses. Thatallows liquidity to be obtained with a greater appetite for risk, which would be welcome in the current context to encourage other lenders to provide new capital. These loans will be granted by UNCDF and the companies will sign a loan agreement withthe UNCDF. ● Performance-Based Payments (Grants): PBP will be used in specific situations where part of the grant is strictly necessary to support the project (i.e. small/mini scale networks, nanonetworks, projects promoting lefenergy efficiency), and will be coupled or based on conditionality with other tools (i.e. loans or guarantees). The socio-economic context of Madagascar presents low access to energy. Furthermore, the high transaction costs faced by businesses ou projects that wish to invest in the energy sector due to the lack of infrastructure highlight the importance of de-risking financing towards them in order to be able to provide a quality service. The PBP will be used to meet the needs of micro, small et medium-sized enterprises (MSMEs), working in the promotion of renewable energy and access to clean energy, whose activities are no longer in the start-up phase but which need support for growth and sustainability. It aims to give them the necessary conditions and capacitiesareas for a real takeoff. The other objective of the PBP is to strengthen the capacity of companies to develop bankable and attractive projects for investors and technical and financial partners. The PBP is intended more to increase production capacity, improvefinancial viability or to address the sustainability and viability of projects, and not to subsidize the launch of new businesses. The amount of the PBP will not exceed 20 to 40% of the CAPEX (Capital expenditure), i.e. material investment expenses, of targeted projects. The companiesISISs that indicate the need for a performance-based top-up payment will sign a PBP agreement with UNDP. PBPs are a type of agreement between UNDP and a responsible party to provide financing based on the verified achievement of a measurable development outcome.welcome. No advance is provided, payments are only made after verification of the achievement of the agreed results (ex post payment). This approach provides more incentive for responsible parties to achieve results. ● Risk sharing mechanisms (loan guarantees)i. Pari Passu Credit Risk Guarantee: A partial credit risk guarantee typically provides credit risk coverage to banks and other investors providing financing to individual companies or a broader portfolio of companies.Coverage can be extended to guarantee up to 50% of the credit risk borne by a bank or investor in the event of default. In other words, when a company fails to pay an amount owed to a bank or investor, the mechanism can cover up to 50% of the loss incurred.by the bank or the investor. Such protection would encourage the continuation of lending activity in these difficult circumstances. ii. Subordinated Credit Risk Guarantee: These instruments provide credit risk coverage to banks and other investors whoses risk absorption levels are higher than those of the party with whom they share credit risks. These guarantees can cover 70% of all losses incurred up to a certain risk percentage alongside another guarantor. Within the framework of the facility, the coverage mayt be extended to guarantee 70% of the credit risk up to 20% of the total value of the underlying credit facility. Volume Guarantee: These instruments (also called market guarantees) are used to provide market/sales risk coverage to different parties.There are actors in a given supply chain who provide products or services to a customer/provider. If sales volumes are not achieved as expected by the company, the instrument can cover the loss incurred by the supplier or downstream company.This instrument therefore allows supply chains to continue to operate, even in the event of disruption. Businesses requesting a guarantee will need to provide details of the funds guaranteed. Successful candidates will sign a guarantee agreement with UNCDF. 3) FieldAs part of the Joint SDG Fund program in Madagascar, UNCDF and UNDP are seeking expressions of interest from eligible private sector entities in need of a risk reduction mechanism in the form of loan guarantees, loans and paymentsperformance-based (combined with other financing instruments) for these companies to finance their working capital, capital expenditure or expansion into the sustainable energy and energy efficiency value chain. Eligible beneficiaries ares entities that operate a business focused on renewable energy for electricity generation (solar home systems, small/mini grids, nanogrids), clean cooking (improved cookstoves, bioethanol, green charcoal), energy efficiency or are able of taffyr leveraged these services to improve efficiency, organizational performance and proximity to customers. UNCDF and UNDP will pre-screen the applications received based on the funding needs requested in the expression of interest. Subsequently, the mechanismsfollow-up will be discussed with eligible companies. Responding to this expression of interest does not mean that the candidate is selected to benefit from a financial mechanism nor does it mean that UNCDF or UNDP are obliged to deploy such a mechanism.inancial. An in-depth review process will be carried out and the outcome of this process will determine the project(s) to be supported through this financial mechanism. This expression of interest will provide concessional lending (loans, guarantees) and performance-based payments (complementingt other financing instruments), to support private sector businesses, including, among others: i. Small and medium-sized businesses in the field of renewable energy for electricity production (solar companies, mini-grids, autonomous solar energyme sold through partners, swarm electrification), ii. Clean cooking, including improved stoves, bioethanol for domestic, institutional or industrial use, the production of green charcoal and briquettes for access to energy or for productive uses.fs and energy efficiency. p class="msonormal" style="margin-left:36.0pt;text-indent:-18.0pt;page-break-after:avoid;mso-list:l1 level1 lfo7;border:none;mso-padding-alt :31.0p
Publish Date: 22-Jan-2024
UN Orgnization: UNITED NATIONS DEVELOPMENT PROGRAMME (UNDP)
Type of Notice: Request for pre-qualification

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