Blended finance vehicles bring together investors with different risk tolerances and return expectations, helping bring private investors to capital-starved but often volatile sectors and markets in developing countries. Public and philanthropic funders can reduce risks for private investors with first-loss protections or loan-guarantees, or increase their returns, by providing low-interest loans. Any first losses in the Africa Agriculture and Trade Investment Fund, for example, are covered by development banks, reassuring private investors.
One type of financing innovation that offers early promise in some emerging markets is that of Yieldscos, publicly traded companies that finance new clean energy projects by offering investors the promise of steady dividends based on project cash flows. Among those taking advantage is Sun Edison’s Yieldco, TerraForm Global, which operates clean energy plants in South Africa, India and several other countries generating nearly 1,000 MW. And now already half built Africa’s biggest hydroelectric project – the $4.8bn Grand Ethiopian Renaissance Dam.
Since construction of the nearly two-kilometre-wide, 170 m high dam began in 2011, governments in Egypt have cast GERD as an existential threat, claiming it will reduce the flow of the Nile, on which Egypt depends.
But the new technical studies will start in February 2016, and will take between six and 15 months for them to be completed.
Another major sticking point in negotiations is how quickly Ethiopia will try and fill the reservoir, which will have a capacity of more than 70 billion cubic metres.
Some experts have said it could take seven years, but Egypt wants the period lengthened to 11 years to reduce downstream impacts.
Also in East Africa , Kenya has successfully piloted infrastructure bonds to raise funds for much-needed infrastructure development. Good example of such: Konza Technology City. The PPP financing model sees the government putting up only 5% of the total cost. Kenya will lease land to private investors to set up shop.