– Climate Fund Managers (CFM) uses a blended model for transmission financing
– The Regional Transmission Infrastructure Financing Facility (RTIFF) is a $1.3 billion initiative focused on interconnecting Southern African transmission
– Blended financing involves using public capital to balance risk and enable private capital to enter the transmission sector
Yusuf Latief of Smart Energy International’s Power Playbook column recently spoke with Kevin Anderson of Climate Fund Managers (CFM) about their use of a blended model for transmission financing, which aims to balance risk with public capital to attract private investment. The Regional Transmission Infrastructure Financing Facility (RTIFF) in Southern Africa, a $1.3 billion project managed by CFM, highlights the challenges of financing energy transmission projects.
The blended financing model employed by CFM involves using development funding from donors to unpack complexities in developing new transmission lines, followed by construction funding once projects are deemed commercially viable. Anderson explains that the model can be applied globally, but each region has its unique challenges and nuances that need to be addressed.
A key aspect of the blended financing model is risk management, with certain risks allocated to public or private parties based on their ability to manage and mitigate them. Anderson emphasizes the importance of fund managers in addressing risks upfront and highlights the need for investors to consider the track record and skill set of fund managers in the transmission space.
Government initiatives, such as the RTIFF, are generating interest from European governments and the private sector, signaling a potential shift towards increased private sector involvement in transmission projects. Anderson points out that when governments show interest and support, it can unlock opportunities for private sector investment in the transmission space.