IEA News
The Federal Democratic Republic of Ethiopia, represented by the Ministry of Finance and Ethiopian Electric Power (EEP), has signed a Memorandum of Understanding (MoU) with the African Trade Insurance Agency (ATIDI), a leading pan-African multilateral trade and investment insurer. This milestone agreement is designed to accelerate Ethiopia’s transition to clean energy by attracting foreign investment into renewable energy projects through ATIDI’s Regional Liquidity Support Facility (RLSF).
The MoU establishes a framework for collaboration between Ethiopia and ATIDI, ensuring that Independent Power Producers (IPPs) or Public Private Partnerships can leverage RLSF, a liquidity support mechanism developed by ATIDI in partnership with KfW Development Bank and Norad. RLSF provides financial protection to IPPs/PPPs by availing and accelerating payments owed by state-owned utilities, addressing a key challenge in the energy sector by enhancing payment security and financial stability.
"We are honored to partner with the Government of Ethiopia and Ethiopian Electric Power to support the development of the country's renewable energy sector. Through our liquidity support, this collaboration will not only reduce financial risks but also attract more investment into Ethiopia’s energy infrastructure. We believe that this partnership will help accelerate the growth of Ethiopia's renewable energy capacity and contribute to the broader goal of sustainable development across the African continent," said CEO, ATIDI Manuel Moses,
In his key message H.E. Ahmed Shide, Ethiopia’s Minister of Finance, said “through this partnership, Ethiopia aims to facilitate timely payments to developers, mitigate financial risks, strengthen the bankability of power purchase agreements (PPAs), and enhance the creditworthiness of EEP”. His Excellency further strengthened his message by stating that “these efforts will create a more attractive investment environment for renewable energy projects”.
Ethiopia becomes the 11th ATIDI member state to sign the RLSF MoU joining Benin, Burundi, Côte d’Ivoire, Ghana, Kenya, Madagascar, Malawi, Togo, Uganda and Zambia. Since its inception, guarantees worth USD24.7 million have been approved under the RLSF portfolio; in turn facilitating investments totaling USD373.1 million and the development of 181.95 MW of installed renewable energy capacity across Africa.
“Ethiopia has embarked on a comprehensive economic reform agenda known as the Homegrown Economic Reform Agenda (1&2). This initiative aims to address structural challenges and promote sustainable economic growth. The key aspects of the reform are creating Macroeconomic Stability; Investment and Trade. Efforts are being made to enhance the investment climate and promote trade by simplifying regulations, improving infrastructure, and encouraging private sector participation. The Regional Liquidity Support Facility (RLSF) is expected to play great role by enhancing the bankability of PPP projects and the sustainable implementation of such projects,” H.E Shide said.
Ethiopia has made significant strides in expanding its energy sector, primarily relying on hydropower as the backbone of its electricity generation. The Ethiopian government aims to diversify this energy mix by leveraging its vast renewable resources including wind, solar, and geothermal energy to enhance reliability and sustainability.
“The reform also aims to boost productivity in key sectors such as agriculture, manufacturing, and services to drive economic growth and create jobs. Investment Attraction too focuses on creating improved investment climate that has already attracted foreign direct investment, particularly in sectors like energy, manufacturing, and agriculture. We look forward to expanding this positive collaboration with ATIDI to cover additional sectors other than energy,” the Minister added.
This collaboration marks a significant step towards a more resilient and investor-friendly renewable energy landscape in Ethiopia. With ATIDI’s support, the country is poised to achieve its energy transition goals while ensuring financial stability for its power sector stakeholders.
ATIDI was founded in 2001 by African States to cover trade and investment risks of companies doing business in Africa. ATIDI predominantly provides Political Risk, Credit Insurance and, Surety Insurance. Since inception, ATIDI has supported USD85 billion worth of investments and trade into Africa. For over a decade, ATIDI has maintained an ‘A/Stable’ rating for Financial Strength and Counterparty Credit by Standard & Poor’s (S&P), and in 2019, ATIDI obtained an A3/Stable rating from Moody’s, which has now been revised to A3/Positive.
RLSF is a guarantee instrument provided by ATIDI to renewable energy Independent Power Producers (IPPs) that sell the electricity generated by their projects to state-owned power utilities, located in ATIDI member states that have signed the RLSF Memorandum of Understanding. RLSF was launched in 2017 by ATIDI and the German Development Bank, KfW, with financing from the German Federal Ministry for Economic Cooperation and Development (BMZ); in 2022, the Norwegian Agency for Development Cooperation (Norad) committed additional funding towards its continued implementation.
RLSF has a capacity of USD153.7 million and supports small and mid-scale renewable energy projects with an installed capacity of up to 100 MW (larger projects can be considered on a case-by-case basis) by protecting the projects against the risk of delayed payments by public off takers; in turn improving project bankability and ensuring that more projects reach financial close.
