Editor’s choice
Editor’s choice
Billions pledged for Africa’s clean energy transition are failing to translate into projects on the ground as high financing costs deter investors.
Experts say the sovereign ceiling rule, which prevents private enterprises within a country from receiving a credit rating higher than the country’s sovereign rating, makes commercially viable renewable energy projects appear riskier to international investors than they are.
In practice, experts say, that means renewable energy projects in Africa with weak sovereign ratings are perceived as risky even when they are commercially sound and backed by international guarantees.
The Associated Press quoted SEI’s Research Fellow in Climate Finance Maria Nkhonjera, who noted that reforming international credit ratings could allow energy projects in Africa to reach their potential.
Expanding low-cost finance, increasing local-currency lending and reforming international debt systems could significantly lower borrowing costs.
Maria Nkhonjera, SEI Research Fellow in Climate Finance
