Responsible Investment Management and Advisory Services

New publication: mezzanine financing for the access to energy sector in Sub-Saharan Africa

We are excited to share our recently published paper that aims to familiarize companies and entrepreneurs with mezzanine financing structures, and how these best serve the access to energy sector (A2E) in Sub-Saharan Africa. Emerging companies that are driving growth in the A2E sector require financing that is appropriate to their projected growth patterns. Mezzanine capital is a broad category of flexible and tailored financial instruments that incorporate elements of both debt and equity financing in a single instrument, and can be considered a hybrid of institutional lending and private equity. It has the flexibility to accommodate the varying financing needs and operational characteristics of early-growth stage companies, and is therefore highly suitable to the dynamic A2E sector. Mezzanine capital offers long-term growth financing, has higher risk tolerance, and can help to optimize a company’s capital structure by efficiently bridging equity and senior debt.

The flexibility of mezzanine instruments also implies more complexity. Hence, one needs to understand the instruments well to fully exploit the benefits of mezzanine finance. In this paper, the concept of mezzanine financing is explained in light of the current COVID-19 crisis illustrated with optimal mezzanine instruments for various company needs, using examples of structures offered by the Energy Entrepreneurs Growth Fund (EEGF).

Please find a link to the paper here.

EEGF is an investment fund that provides financing and technical assistance to entrepreneurs operating in the A2E sector, which includes off-grid electricity and mini-grids, in Sub-Saharan Africa. EEGF, with Triple Jump as portfolio manager and Persistent Energy Capital as advisor, was launched in 2019 with capital from FMO and the Shell Foundation. EEGF focuses specifically on mezzanine instruments, providing entrepreneurs with flexible and risk-tolerant solutions that can be tailored to the specific situation of the company. It is EEGF’s ambition to work closely with entrepreneurs and provide them with the appropriate type of financing and support to help them realize their growth ambitions.