Guarantees for renewable energy investments
1. General information about the guarantee scheme
The Norwegian Sovereign Guarantee Scheme for Renewable Energy is a 5-year (pilot) unfunded guarantee scheme that aims to catalyse investments for energy projects in low- and middle-income countries (LIC and MIC). The total amount under the guarantee facility is 5bn NOK. The amount available under the facility through this call for proposals is up to 1.75bn NOK.[1]
The aim of this call for proposals is to attract applications for guarantees that fit the criteria and objectives of the scheme and to catalyse further investments in renewable energy in low -and middle-income countries.
This call for proposals is application-based and open to all applicants (Norwegian or international) that meet the criteria outlined in sections 4 and 5. Applications are evaluated according to the objectives, priorities and criteria set out below. In addition, Norad will continuously assess our total guarantee-portfolio to ensure that we adhere to our mandate.
There is no specific deadline for the call. Norad will initiate a first round of assessments in January 2025 and may pause the consideration of proposals once the total volume (1.75bn NOK) has been committed or due to other financial or operational constraints.
The application process is divided into two stages. Stage 1 entails submitting a concept note on the envisaged use of the guarantee and supplying information about the applicant, the parties involved in the transaction and the timeline for the proposed investment. Successful applicants will be invited to Stage 2, which entails a detailed proposal, backed up by supporting documentation. More details on the application process can be found in section 5.
No applicant is entitled to a guarantee from this scheme even if all the formal criteria are met.
Please note that certain features of the guarantee scheme are subject to final approval from Parliament and the Norwegian Agency for Public and Financial Management, expected in January 2025.[2]
2. Objectives and indicators
The overarching objective of this guarantee scheme is to support low- and middle-income countries in their efforts to increase energy access and deliver on the energy transition. This includes poverty alleviation, economic growth, and supporting countries’ national development goals.
It is important for the scheme to gain knowledge of the long-term effects. Successful projects should demonstrate a strong commitment to the strategic use of knowledge and a significant contribution to the following objectives:
A. Objectives
- Development and poverty alleviation through increased renewable energy access
- Reduction in greenhouse gas emissions
- Supporting national policy agendas towards increased renewable energy
B. Performance indicators
Performance indicators will be tailored and finalised in each agreement, but are likely to include:
- Mobilised capital from private sector
- Number of additional households with access to electricity
- Number of jobs created
- MW renewable energy installed
- Avoided CO2 emissions
3. Guarantee coverage
A. General information
The following information outlines some of the guarantee specifics:
- The guarantees will have Norway’s AAA rating. The aim is for the rating to improve the overall risk profile of the project/portfolio, reduce the cost of capital for investors, improve the project’s bankability and unlock more private capital.
- Norad must share the risk with another professional entity and cover up to a maximum of 50 per cent of the addressed risk exposure.
- The indicative minimum guarantee amount is 200m NOK. Please see section 5 for further details.
- Guarantees can be provided in USD, EUR, or NOK.
- The guarantee tenor may be up to 15 years. Anything beyond this may be considered, subject to Norad’s assessment and discretion.
- The pricing of the guarantee will reflect the risk covered (see section 6C for further details).
- Subsidies for guarantee premiums can be applied for (partly or in full) through a separate application process, which will take place in parallel with Stage 2 (see below). More details on the process will be provided by Norad after the first round of assessments has taken place.
B. Guarantee types
Norad will prioritise credit guarantees as part of this call for proposals. Norad’s guarantees can cover both individual projects and portfolios, with a preference for the latter.
C. Target countries
The guarantee scheme is limited to countries that are eligible for ODA funding. A maximum of 30 per cent of the guarantee scheme of 5bn NOK can be guaranteed in low-income countries. Norad will award guarantees based on an overarching analysis of the applicants’ collective geographical spread, in addition to the criteria below.
D. Sectoral coverage
The purpose of the guarantee scheme is to support projects that promote renewable energy. This includes, but is not limited to, renewable energy production and infrastructure, off-grid power production and energy efficiency.
4. Target groups and eligibility criteria
This call for proposals is open for applications from banks, funds and financial institutions, specialised entities focusing on guarantees, and individual projects and/or companies.
The eligibility criteria will depend on the type of risk to be covered and the guarantee beneficiary. These criteria will include:
- The guarantee beneficiary must be a legal commercial company. Accurate and complete information about the legal status of the guarantee beneficiary, and its ownership must be provided. The same applies to the applicant, even if the applicant is not the guarantee beneficiary.
- All projects proposed must be aligned with the objectives of the guarantee scheme and must have set clear, achievable aims for the objectives listed above under section 2A, grounded in robust research and analysis.
- All projects proposed must comply with the OECD/DAC criteria for Official Development Assistance (ODA).[3]
- All projects must consider the local ownership and sustainability, including a potential exit strategy, if relevant.
- The applicant and/or relevant involved entity must demonstrate successful past performance in implementing projects/portfolios or the investment activities proposed in the application.
- The applicant and/or relevant involved entity must hold the necessary administrative, technical, and financial expertise and capacity in carrying out the proposed investment activity.
- The applicant and/or relevant involved entity must confirm that it conforms to relevant guidelines, such as the UN’s guiding principles on business and human rights, the OECD’s guidelines for multinational enterprises and the IFC performance standards. Enterprises may be subject to risk-based due diligence to identify, prevent and mitigate actual and potential adverse impacts in line with UN and OECD guidelines.
- The applicant and/or relevant involved entity must confirm that they have a Code of Conduct or other similar ethical guidelines. As a minimum, these guidelines must include principles and routines to prevent, detect and address sexual exploitation, abuse and harassment (SEAH). Further information, including other requirements, is set out in the guidance for the preparation of ethical guidelines for Norad’s grant recipients.
- The applicant and/or relevant involved entity must confirm that it holds systems and routines for risk management and internal control. This includes systems and procedures for the prevention, detection and management of potential corruption cases and mismanagement, as well as security assessments and safety measures for employees’ stays abroad (e.g., training, guidelines, insurances, and equipment). Other cross-cutting issues, such as human rights, gender equality, climate change, nature, and anti-corruption, must also be considered.
There is no deadline. Applications will be continuously processed starting January 2025.
To learn more and apply, click here.
