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Africa’s clean energy projects face financing barrier from credit rating rules

The 'sovereign ceiling' rule stalls clean energy projects across Africa by tying project credit ratings to a nation's sovereign rating, causing investors to perceive commercially viable operations as risky, experts say.
Nearly 600 million people across Africa still lack access to electricity, according to the International Energy Agency, while subjective credit assessments cost African countries up to $74.5 billion annually in lost investment.
Kenya's Menengai Geothermal, Zambia's IFC-led Solar Scaling, and Nigeria's Solar IPP pipeline struggled for funding as investors raised concerns over creditworthiness despite projects having strong fundamentals and predictable cash flows.
Dr. Sibusisi Nkomo of the Cambridge Institute for Sustainability Leadership said the ceiling functions as a "binding constraint," while Maria Nkhonjera of the Stockholm Environment Institute cited "risk mispricing" as a major factor.
Of Africa's 54 countries, only Botswana and Mauritius currently hold investment-grade sovereign ratings, prompting analysts to suggest multilateral institutions like Afreximbank could offer guarantees to help separate projects from sovereign risk.

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Africa renewables projects stalled over credit rating rules

Renewable energy projects across Africa have stalled because they cannot secure funding due to a rule that ties the creditworthiness of projects to the sovereign rating of the country where they operate, the Associated Press reported. African nations are keen to boost the production of renewables as they pursue energy autonomy, an objective underscored by the de facto closure of the Strait of Hormuz, which highlighted many states’ reliance on oi…

5 days ago·New York, United States

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