Page 21 - U4SSC Compendium of practices on innovative financing for smart sustainable cities projects

Sustainable Development Goals impacts

SDG 1: Reduced poverty by contributing to local employment

SDG 7: Provision of affordable, reliable, renewable and modern energy source. The project will
increase the share of renewable energy in the global energy mix

SDG 13: Take urgent action to combat climate change and its impacts

SDG 17: Partnerships between government, international financial institutions and private sector

People-first elements

• Environmental impacts: Cabeólica is the first commercial-scale PPP wind farm in sub-Saharan
Africa. The project has consistently achieved a reduction in emissions of 55 000 tons of CO
2
annually, providing new and improved access to clean electricity to 360 000 people. Cabeólica
has been recognized as a Clean Development Mechanism by UNFCCC and was awarded “Best
Renewable Energy Project of the Year” by the 2011 Africa Energy Awards.
• Economic benefits: The project’s energy production has reduced the country’s consumption
of heavy oil fuels and diesel, translating into significant savings. Prior to Cabeólica, Cape Verde
has one of the highest energy generation costs in the world.

• Social benefits: The local population of Cape Verde now benefits from an upgraded and
extended electricity grid. The project has freed up public funds for other uses and reduced
the frequency of blackouts in the country.

Financial information

The project was financed 70 per cent through debt and 30 per cent through equity. Equity financing
came from AFC (with 94 per cent stake), FinnFund, InfraCo Africa, Electra and the Government of
Cape Verde. Debt financing was provided by EIB (USD 42 million) and the AfDB (USD 21 million).
The total capital cost was USD 84 million. InfraCo Africa assumed the direct costs and risks of early-
stage project development, enabling the project team to navigate and resolve technical, legal and
regulatory issues and allowing the wind farms to be commercially viable and quickly constructed.

Observations

• As a pioneer in large-scale wind energy PPP in sub-Saharan Africa, the project plays an important
role in encouraging other countries to implement similar projects.
• The key ingredients for the project’s success were the participation of solid, transparent and
high-profile partners; government support and stable regulatory framework; contractual
instruments to ensure predictable and transparent cost planning and cash flow projections;
and other instruments to de-risk the project, making it less likely to incur financial loss.

Compendium of practices on innovative financing for SSC projects | January 2023 9