Gaia Fund Managers is pleased to announce the incorporation of the Gaia Africa Climate Fund in Luxembourg with the Apex Group appointed as fund administrator and alternative investment fund manager (AIFM). The first-of-its-kind fund will allow institutional investors to participate in the equity of established utility-scale renewable energy projects and related climate infrastructure in African markets.
The Climate Fund aims to create a secondary market for renewable energy developers and early-stage investors in Sub Saharan Africa to offload or sell their equity holdings following the completion of projects’ construction.
The fund, which targets $200 million in assets, will play a key role in deepening private capital markets across the African continent and aims to complete the raise of $50 million in its first round of funding by the end of the year.
“The Gaia Africa Climate Fund is highly catalytic”, explains Renier de Wit, managing director of Gaia Fund Managers. “The fund will go a long way as first mover to create an ecosystem of capital recycling and sustainable project development on a continent poised for growth in the market for renewable energy generation.”
De Wit says the fund will address a key impediment to the momentum of new renewable energy projects in Africa, namely exit holders of developers’ stakes in new builds. When approaching initial funders, developers of renewable energy projects are often asked about their exit strategy once the project is in operation and delivering predictable cashflows.
“It can take a developer up to ten years to design and build a renewable energy project just to find that there’s no one to buy it,” De Wit says. This poses a great risk to the momentum in attracting new renewable energy projects to an energy-hungry continent, locking in development capital that could be deployed in a following project.
The Gaia Africa Climate Fund will create some comfort for developers that their capital will be released from the project once it is in operation and yielding predictable cashflows. The fund is raising capital from European and American institutional investors as well as their counterparts in Africa.
“The Gaia Africa Climate Fund is especially suited to the long-term investment needs of retirement funds,” De Wit says. “There are some established players in this regard on the African continent.”
For this reason, Gaia Fund Managers has listed B preference shares of its existing Gaia Renewables 1 Fund on the Cape Town Stock Exchange, with significant progress made to concluding secondary listings on the Nairobi Securities Exchange in Kenya as well as the Botswana Stock Exchange. These listings will allow retirement funds in South Africa, the East Africa Community and Botswana to invest in the Gaia Africa Climate Fund thereby accessing regional renewable energy investments through the capital markets.
“Renewable energy as an asset class is a solid match to the long-term liabilities of retirement funds,” De Wit says. “The Gaia Africa Climate Fund is designed to pay predictable, indexed and dollar-based dividends to investors.”
Kavitha Ramachandran, chief operating officer at Apex Group Luxembourg, adds, “We are delighted to be working with Gaia as a lead service provider for this pioneering and path breaking climate fund and look forward to help drive positive change in an area which is so closely aligned with the Apex Group’s sustainability goals.”
The fund was selected as one of four funds to be accelerated by the Luxembourg-based International Climate Finance Accelerator (ICFA) in 2021 for its importance in creating access to renewable energy as an asset class on the continent.
In addition, De Wit also shared Gaia’s observations about the lack of recycling development capital in renewable energy projects across the African continent at French President Emmanuel Macron’s Summit for a New Global Financing Pact in Paris last year.
The Gaia Africa Climate Fund is an Article 9 fund and is aligned with several of the United Nation’s sustainable development goals (SDGs), including access to affordable and clean energy (SDG 7), climate action (SDG 13), and industry, innovation, and infrastructure (SDG 9).
