Setting the Stage: Mini-Grids

Speaker 1 0:09

So when many grids have turned from small pilots to an electric wave. We were there when mini-grid regulation was established. When financial transactions were closed. We saw new technology thrive. And companies failed. This is where we tell the stories. This is where we discuss the future. The mini-grid business. Powered by INENSUS.

Nico 0:35

Hello, this is Nico.

What AMAP 2.0 Is and Why

Nico 0:37

Today we are talking about how African minigrid companies can use the Africa Minigrid acceleration program AMAP 2.0 to boost their managerial capacities. I'm delighted to welcome Benjamin Curnier from AMAP, Principal Green Mini-Grids Officer at the African Development Bank CEFA. Benjamin, what is AMAP 2.0?

Benjamin 1:00

Thank you, Nico, and first of all, thank you for inviting me to speak about this. Maybe just by way of introduction, as you've rightly pointed out, I'm the minigrids officer for CEFA. CEFA is the Sustainable Energy Fund for Africa, which is the multi-donor special fund administered by the African Development Bank. And we provide a range of technical assistance and concessional investment financial instruments into projects which look to accelerate the deployment of renewable energies across the continent through private sector business models. And as you've rightly pointed out, being the mini-grid officer, that means that I'm very much focused on mini-grid projects. And so AMAP 2.0 is now a second iteration of our technical assistance program for the acceleration and deployment of mini-grids on the continent. We've been running AMAP 1 over the course of the last five years. That's been a $7 million technical assistance program, which has provided enabling environment support mostly to public sector beneficiaries across a number of countries on the continent. That program is now largely dispersed and coming to an end, and we're wrapping up the last support activities to those public sector beneficiaries. And we've been hard at work thinking about its successor program.

Two Buckets of Support

Benjamin 2:22

And AMAP 2.0 will go in a slightly different direction, insofar as we are going to pivot the support to provide much more direct capacity-building support to the private sector, that is to say, mini-grid developers in a nutshell, accepting that there is actually quite a lot of ongoing public sector support in the market through a variety of programs. And actually, we've realized somewhat less so for the private sector. And that's the main reason we're pivoting towards that private sector angle in AMAP 2.0.

Nico 2:59

Yeah, and I understand that you've been talking to mini-grid companies a lot, and they told you that, well, of course, they know best what they need to become successful, right? And uh from there you picked certain support mechanisms that, in principle, they can fine-tune and define themselves. So the companies are in the lead of creating their own technical assistance support, correct?

Benjamin 3:28

Yeah, that's quite right. So we we've obviously spoken to several developers in designing this AMAP 2.0, and we unsurprisingly spoke to several market actors, not least Amder and ARE, to try and understand their perspectives as well. And we identified really probably sort of two, let's call them buckets of support that we felt could really sort of make a difference in the market. The first one is a support that we're targeting to what we call sort of maybe that tier one, that slightly larger, more established mini-grid developer. And we're conscious that those organizations need a wide range of support in order to continue to scale their businesses. That might be project-level activities, so TA in order to identify

Pillar One: Developer-Led TA

Benjamin 4:19

additional sites, maybe test different business models, test productive use applications. They might be looking at entering new markets. We're mindful that there are several developers that are obviously trying to diversify their risk by entering a range of markets and scaling their businesses that way. That obviously requires quite a lot of preparatory work. But also scaling the business from the business perspective itself. So raising finance, developing those investment veranda, developing the models, the financing models, approaching financiers, those are all areas of support that we're we're mindful that those scaling developers need. So that's one area of support that we want to target, and maybe we'll go into the mechanism of how that'll work in a moment. But the second then area is also thinking about maybe that next tranch down of developers who have probably been successful in developing a number of mini-grids, but are now needing to really likewise scale their businesses, overcome that valley of death. And here, the feedback that we're getting is that the needs are more really from a sort of a business management perspective. And in particular, there is a need to reinforce capacity at that C-suite level, and even more specifically in the areas of financial and legal skill set, but not exclusively, maybe there's ESG capacities that are also required. So just recapping the first is support destined to help larger, more established developers start to really think about how they scale and diversify their businesses. And the next tier is really sort of getting the capacities and the skill sets into those businesses to help them get to the next level of size. Aligned to those two areas of support, we've developed two mechanisms under AMAP2, which we're inviting developers to apply for. The first funding area, which we're calling pillar one, by the way, for ease of reference. Under pillar one, we're inviting developers to apply for up to $750,000 worth of TA support. And we will probably fund a maximum of five developers up to that amount. And I say up to, right? It's not a guaranteed $750. It depends on sort of what applications we get and how many and how many we want to fund. But those are the sorts of metrics that we're thinking about. And really that's very much an open call insofar as we're inviting developers to really tell us what it is that they want to do under that support. We're expecting them to submit an application in which it details the kinds of TAs and the kinds of activities that they want to undertake. And those activities will be typically consulting

Procurement, Payments, and Flexibility

Benjamin 7:12

activities. So we're expecting them to put forward requests around feasibility studies, project management, engineering services, maybe finance and accounting, training and development. Those are the kinds of things that we're thinking they are going to apply to us for. And so we're expecting them to then sort of put together a program of works to submit that to us, and then we'll be able to and we'll make an assessment on that in comparison to all the other applications that we get. So that's very much an open developer-led set of activities, which, should the applicant be successful, we will then enter into a grant agreement with that developer, and they will then be able to use the funds that we make available to them in order to execute those types of consulting engagements.

Nico 8:02

Does that mean, Ben? Sorry to interrupt you, but does that mean that these pillar one companies that have been selected by you, they basically have a budget of up to $750,000, and then they can select the consultants themselves.

Benjamin 8:17

Yep, that's exactly right.

Nico 8:19

Like select the people, the service providers, those legal experts or those technical experts that they want to work with, they basically select them from the free open market.

Benjamin 8:30

That's right. During the selection process, we will be testing those organizations' procurement capabilities in order to get comfortable that they have the capabilities and the fiduciary responsibility to execute an appropriate level of diligence during that procurement process. But providing that that procurement capacity meets the bank standards, then your summary is quite correct. That developer will be then responsible for going out and procuring the agreed activities as part of a grant agreement letter.

Nico 9:03

Yeah, and does that mean that these companies need to run tenders, or is it sufficient to just collect three quotations?

Benjamin 9:11

That um depends on the nature of the activity and it depends on the quantum of money. But for the most part, the bank and the nature of Cephas funding will require an open market competition. It typically will require a multi-stage process with expressions of interests and then short listing of candidates and then an evaluation of submission.

Nico 9:33

I've had a look through the application documents, and if I remember correctly, the pillar one applicants can already indicate which service provider they want to work with for what type of service. I'm like I was a little bit confused

Timelines and Implementation Horizon

Nico 9:55

because there was supposed to be a competitive procedure, but there's still this field where mini-grid companies are then supposed to at least indicate whom they would want to work with.

Benjamin 10:06

In those fields, it's rather that we're expecting examples of the kinds of uh providers that you might go out and work with.

Nico 10:15

The uh the disbursement of the funds, like are you disbursing to the mini-grid companies and then they pay their service providers, or are you paying the service provider on behalf of the mini-grid company?

Benjamin 10:29

Uh both of those options are possible. Um and that will be agreed during the negotiations of the grant agreement. If there are a large number of payments to be made, so one, for example, if if there are an if there are several small engagements which each have a number of milestones, and one ends up with, therefore, a large number of payments, it makes more sense for then the developer to be responsible for those payments rather than using the mechanisms of the bank. In that case, we require the developer to open what is known as a special account, which is a reserved bank account into which we pay and only receive Cepha monies. It is not used for anything else. And then that account can be used to make payments, and the bank can top it up according to agreed milestones. But then that account is then subject to audit at the end of the project to make sure that the funds have gone to the right places. If there are sort of larger engagements, but with therefore a fewer number of milestones, then the beneficiary, that is to say, the developer, can elect to embark on what's known as direct payment, in which case we will pay the service provider on behalf of the developer. So both of those options are available. And we can do both in one engagement as well.

Nico 11:45

Cool. And implementation periods, how long are you expecting these services to take under pillar one?

Benjamin 11:52

So we are giving a map two five years as a program. Um that's across all its pillars. We anticipate probably these engagements to kick off under pillar one. By the time all the recruitment is done and the procurement exercises are done, we expect it to take probably about a year or so from now. And therefore, the implementation period for those activities is probably going to be in the region of three

Pillar Two: C‑Suite Placements

Benjamin 12:18

years. It will have to finish before the end of AMAP two. So that could go as far as the end of 2030, but we would expect it to finish sooner.

Nico 12:27

Okay, so you're expecting mini-grid companies to basically apply now to specify the services they will need over the coming four years, more or less. And then one year from now, they can then call off the money and basically request the service provider to work on the services ordered. So, how would companies do that? Like I'm well, I'm also a director of mini-grid companies, so I know very well that priorities change over time. And now, if I tell you, oh, I need this and that service now, I would probably not be able what type of service I would need next year or even the year after. Are you flexible enough to change the type of services as you go?

Benjamin 13:18

Um so um that's an excellent question, and I think we're probably gonna have to be mindful of that and be as flexible as we can. This is a very different approach to providing support than um we have done previously, and I don't think anybody has tried a program of this type previously. So I think there is an element of discovery as we go, but I think we can look at how to incorporate flexibility into the buckets. So as long as we understand the buckets and as long as we know the sort of activities and the sort of outcomes that we want to achieve, I think we can make changes. We do have mechanisms for changing those grant agreements as required.

Nico 14:03

Yeah, and one way of doing this is defining, as you said, the buckets relatively widely, or defining the services in a way that you can also fine-tune them later. So I guess there will be enough room for the companies willing the larger uh funds of up to $750,000 to manoeuvre in the future.

Benjamin 14:25

And I also

Eligibility: Who Can Apply

Benjamin 14:26

might add that, of course, there is also flexibility when one procures a service provider, there is also the flexibility to change the terms of reference, not massively, but to tweak those terms of reference over time. So if a service provider, a consultant is on a long-term support contract with that developer, it might be natural to expect that there is some sort of evolution of the nature of the work in that as well. We can look at how to manage that as well.

Nico 14:54

Cool. All right, then let's get to pillar two.

Benjamin 14:57

Yeah. Pillar two is quite different. You'll recall at the beginning of our conversation we talked about the desire to provide capacity to the C-suite or executive suites level for developers. So, what we're proposing is that developers like under pillar one, uh, you know, apply to us, and the applications are now already open, and there are forms to download

How to Apply and Deadlines

Benjamin 15:22

and to complete in which we'd like developers to articulate their C-suite capacity requirements. So, you know, do you need legal skills, do you need financial skills, do you need other? And if so, what is it that you want that capacity to do, to achieve? And once you've submitted that, then we'll be able to obviously evaluate and shortlist our preferred developers. And then we are going to go out and to procure a service provider whom we will task with finding the skills that or the individuals who have the skills that the developers have expressed a need for and to run those placements. So, Cepha, we will not be running those placements ourselves. We are simply identifying the need, we're defining the solution space, and then we will find a service provider who will be able to find those skills and place those skills in-house. And we anticipate being able to provide these sort of secondments or placements with up to 10 developers. Um, and those placements are expected to be up to 50% of an FTE for up to 18 months.

Nico 16:38

All right. And you cover 100% of that cost?

Benjamin 16:41

And we cover 100% of that cost.

Nico 16:43

Nice, nice. All right. Did you already mention the budget of that pillar two?

Benjamin 16:50

We haven't specified a budget. Uh we have an internal budget, of course, but we haven't gone externally with a budget. It is up to 18 months of part-time support.

Nico 17:01

Yeah, yeah. I see. All right, good. All right, interesting. And how many companies can be awarded here? Can you give an indicative number for companies to understand better what their opportunities are?

Benjamin 17:14

We're looking up to a maximum of 10 developers.

Nico 17:16

Go ahead.

Benjamin 17:17

And organizations are more than welcome to apply under both pillars one and two. Um, we expect that and we encourage that. But organizations will not be awarded both pillar one and pillar two for obvious reasons. But of course, nothing stops organizations under pillar one, given that it is deliberately open and deliberately quite uh flexible. Nothing stops organizations under pillar one expressing and designing a similar type intervention under their pillar one activities. So they could likewise recruit as a consultant, you know, an individual to support them with their financial or their legal elements under pillar one. So there's overlap there, of course.

Nico 17:57

Okay, now what are the minimum requirements for mini-grid companies to apply for those two pillars? Uh uh I understand that the requirements are different for pillar one, which is then for the larger companies, more experienced, older, probably those who have already invested more, and then less for the pillar two. And uh maybe, Benjamin, you can just tell us the hard facts of what you're looking at here.

Benjamin 18:29

Sure. So under pillar one, our general eligibility are that those developers need to be incorporated in an African country, they've never been declared bankrupt, they have audited financial statements for three years, and they have an established ENS management system. Further, that they have been operating mini-grids for five years, have 15 mini-grid operations or more, and are in two African countries. Ideally, they have raised about 15 million to date in grants, equity, or debt. And we think that equates to roughly 7,000 or more active connections.

Nico 19:09

Okay. And the financial statements you mentioned, are there any requirements that these are, I don't know, EBITDA positive or anything? Or do you just want to see the companies preparing these financial statements, whatever the numbers show?

Benjamin 19:25

We're mindful that if we were to only select profitable companies, uh, unfortunately, the reality is that they are few in today's nascent industry. Um, so no, we don't have that required.

Nico 19:37

Good. That will be a relief for many companies, I guess.

Benjamin 19:40

Yeah.

Nico 19:41

All right, sounds good.

Benjamin 19:42

And then maybe just one last point, uh, just to remind as part of the application process, we do need to see your procurement policies, and we will be testing those as part of the evaluation process to make sure that we feel that they are of sufficient caliber to meet the bank's requirements.

Nico 19:59

Yeah, well, according to my experience, often procurement processes are not very well formalized in mini-grid companies. Well, of course, companies compare prices, especially like when it comes to hardware, procurement of assets, poles, cables, batteries, and so on. But usually they don't have a written document where they describe how procurement is supposed to work. At least I haven't seen that very often. What do all the other companies do that don't have that document at hand?

Benjamin 20:35

Unfortunately, that is a requirement for us. We we cannot give the flexibility and the responsibility of managing those funds to a developer without having ascertained that they have those capabilities. So if those organizations don't have that policy, then I would invite them to do their research and implement one promptly.

Nico 20:58

Yeah, okay. And uh ChatGPT can come in handy here, I guess. So now, what is the timeline? When are you expecting the applications to come in from the mini-grid companies?

Benjamin 21:09

Before we go there, Nika, maybe just to highlight that the eligibility criteria for pillar two are a little bit less onerous.

Nico 21:16

Oh, yeah, true. We haven't gone into that yet.

Benjamin 21:19

Yeah. And so we still need them to have audited financial statements. They still need to be incorporated in Africa. But the specific criteria around the size of the organization are much lower. So we're only looking at companies that have 500 or more active connections and have raised around 3 million in funding to date. So those are, as you can see, quite a bit lower than the pillar one. But uh, you know, all of those requirements are very well articulated in the application forms and the accompanying application guide.

Nico 21:55

Yeah. Where do companies find those documents, application forms and application guide?

Benjamin 22:00

It's a good question.

Nico 22:01

Well, I found them on the CIFA website actually, and there was a sub chapter, you could say, on AMAP 2.0, and that is where you can find them. And I will also link those in the show notes of this podcast episode.

Benjamin 22:16

Great, thank you.

Nico 22:17

Now let's go into the question of timelines. Like when are you expecting companies to submit their proposals?

Benjamin 22:27

Uh yeah, so the applications are now open, and the deadline for submissions is Friday, the 17th of October. So we are just shy now of uh three weeks. We have a window for questions as well. So we are open to receive questions. If you have questions or if developers have questions on the structure or on the forms and/or their annexes indeed, then we're open for questions up until 14 days. So that's to say prior to the submission. So that's the 3rd of October. Whilst we're speaking of the application process, the forms for pillar two are relatively simple. We just need the application form, and then we need document incorporation, the statements, a proof of bank account, and then we require a log frame as well. But under pillar one, it's a little bit more onerous. So under pillar one, there are a number of annexes that we're expecting to be completed in addition to the application form. And those cover, in addition, an implementation plan, a basic procurement plan, the procurement policy and procedures manual that we referred to earlier, uh, an activity-based budget, and then a log frame and a theory of change.

Nico 23:44

All right, which means that mini-grid companies and their CEOs or C-level staff, they shouldn't start late. Look at this opportunity in time and make sure you have enough time to fill all the documents and compile everything to hand it. And uh what is the submission process like? Is it submission by email or do mini-grid companies need to upload anything to a portal?

Benjamin 24:12

No, it's a simple application process through an email and it's minigrids at afdb.org.

Nico 24:18

Perfect. Thank you, Benjamin. I think that was a good overview of the AMAP 2.0 opportunity and the way minigrid companies can boost their managerial capacities through that facility. And uh to all our listeners who are still looking for inspiration of uh what type of services they could request, please get in contact with INENSOS. As you know, we can offer many of these services that were just discussed. We have uh lawyers in our team, we have financing experts, we have economists, we have uh engineers in our team from different countries, French speaking, English speaking, even Portuguese. So be in touch, let us know. All right, thank you, Benjamin. That was very insightful. And uh all the best for your program. And uh I hope that this will actually have great impact in the mini-grid sector and make our mini-grid companies more professional.

Speaker 1 25:24

Thank you so much.

Nico 25:25

Thank you. Bye bye.

Speaker 1 25:26

Thank you, Nico. This episode of the Mini Grid Business has been brought to you by INENSUS, your one-stop shop for sustainable minigrids. For more information on how to make minigrids work, visit our website at an inensus.com, or contact us through the links in the show notes. The minigrid powered by INENSUS.