France gives Co-op Bank, CFC Sh3.9bn for low cost credit
French development agency AFD will offer Sh3.9 billion to CFC Stanbic and Co-operative Bank for onward lending to investors in renewable energy to ease the ongoing power crisis. Photo/FILE
French development agency AFD will offer Sh3.9 billion to CFC Stanbic and Co-operative Bank for onward lending to investors in renewable energy to ease the ongoing power crisis.
The two banks will share the Sh3.9 billion equally and pay AFD an interest rate equivalent to 0.5 per cent above the average three-month LIBOR rate for the first two years of the 12-year facility.
This means that the twin banks will pay the French agency an interest of 2.02 per cent since the three months average stands at 1.52 per cent, and they will be expected to lend at about 5.52 per cent to borrowers.
“The credit line has been availed to the two banks for onward lending to businesses that wish to invest in renewable energy projects of small hydro, wind, biomass, cogeneration and solar as well as in energy efficiency projects,” read part of the statement announcing the deal.
“The expected investments should reach Sh5.6 billion for 20 to 30 projects and represent an equivalent of 20 megawatts capacity.”
The focus on renewable energy is to a boost for Kenya’s power sectors that is faced with a power shortage on increased demand for electricity amid low supply.
Lack of finances has delayed the planned mega power projects while investors with smaller power projects of less than 10 megawatts have been shunned by financiers—making the AFD lending a welcome move.
For the twin banks, its offers them an opportunity to tap into green energy financing that will not only earn them interest income of about Sh156 million annually and boost their credentials of firms keen on the environmental. CFC Stanbic stands to reap more from the deal as it has been active in buying carbon credits from ventures that reduce the emission of carbon to the atmosphere such small hydro, solar and biomass power generation.
It could also gain from larger manufacturers that will tap the facility to boost redesign their production and cut the use of thermal power.
Reduce power consumption Last year, the bank partnered with Kenya Power, which distributed 1.25 million energy-saving bulbs households in Kenya to reduce electricity consumption.
The savings helped the country reduce its demand for thermal power — whose contribution to the national grid has been rising — and which emits tonnes of carbon dioxide to the atmosphere, earning Kenya Power about Sh100 million.
Carbon trading involves the purchase of carbon credits from firms that emit less carbon dioxide, mainly from Europe and Asia, and which have exceeded their emissions limits.
The French investment in green energy projects comes at a time when sovereign funds are ramping up their investment in the Kenyan market, egged on by the country’s political stability and high economic growth that promises higher returns.
Last year alone, four sovereign funds — Norwegiain Norfund, German DEG, French Proparco, Netherland FMO, and British CDC— bought big stakes in Kenyan companies and extended credit lines worth Sh25 billion, underlining increased investor confidence in the Kenyan economy where the funds typically seek to promote socio-economic development.
The sharp rise in demand amid low supply of electricity has made the country to a power-deficit nation— setting the stage for blackouts and a spiral in power costs as power managers turn to expensive emergency power.
