Q&A – Guarantees for renewable energy investments in low- and middle-income countries
(English only)
- What do we mean by renewable energy?
- The guarantee scheme was created to increase the share of renewable energy in low and middle-income countries. Therefore the scheme aims to support projects that can contribute to this objective. This implies grid-based power plants, distributed solutions, power grids and other energy infrastructure, energy efficiency measures, and other efforts for a more productive use of energy, such as clean cooking. Renewable energy includes, but is not necessarily limited to, renewable energy production and infrastructure, off-grid power production, and energy efficiency and other efforts for a more productive use of energy, such as clean cooking.
- What can the subsidies cover and what is the process for applying for a subsidy?
- Applicants can apply for subsidies to cover parts of the guarantee premiums, and these will be awarded according to the demonstrated need, potential for impact and additionality.
- This will be a separate application process following Stage 1. Applicants in need of subsidies, who are accepted to Stage 2 will receive more information from Norad.
- What risks will the guarantee scheme cover?
- The guarantee scheme can cover different types of risks, but will initially be used to cover credit risk. Still, Norad will assess transactions according to an overarching assessment of risk (across the context, experience, and transaction) meaning that other risks can be considered.
- What information about the guarantee beneficiary should be included in the concept note?
- The concept note should cover a short description about the guarantee beneficiary. This should include relevant information about overarching work and activities, any relevant experience, ownership, and any other relevant information the applicant deems as appropriate. The beneficiary must be able to display strong management of financial, administrative, and technical policies and procedures, and present a system of internal controls that safeguards assets and protects against fraud and corruption.
- What are the governance requirements?
- The guarantee beneficiary, guarantee debtor (where appropriate), and any other relevant entity/company should have sufficient systems and procedures for managing cross-cutting issues, such as human rights, gender equality, climate change, nature, and anti-corruption. This will vary according to organisation and project/portfolios but should outline an understanding of the issue(s) along with mitigation measures specific to the organisations’ work and activities.
- How long will it take to process an application?
- We will start processing the first round of applications in January 2025. The total processing timeline will be determined by due diligence, risk assessments, and any negotiations.
- How much can we expect due diligence cost to be?
- The costs will only be for the external consultants undertaking due diligence and will vary according to the size of the transaction. We will aim to keep applicants updated on costs throughout the due diligence process.
- What is meant by sharing the risk with a professional entity?
- Norad must share the risk with another professional body and cover up to maximum 50 percent of the addressed risk exposure (i.e., the risk that the guarantee is intended to cover). This means that the risk must be shared with another co-guarantor or the guarantee beneficiary, if appropriate.
- How does Norad envision pricing to happen?
- Norfund will undertake a risk assessment which will inform the price of the guarantee premiums. This is a two-step process entailing 1) an initial assessment which will inform an indicative price, and 2) a final assessment confirming a final price of the guarantee premium. The pricing of the guarantee will reflect the risk covered.
- What is the maximum coverage Norad can offer on a guarantee?
- There is no strict upper limit for a guarantee. The amount available for guarantee coverage through this call for proposals is up to 1.75bn NOK, so we will limit the considerations of applications above 500m NOK, as this will reduce the ability to support several projects.
- What cross-cutting issues have to be considered?
- The cross-cutting issues that need to be considered include human rights, gender equality, climate change, nature, and anti-corruption. Each issue’s consideration will depend on the project/portfolios.
- What should we do if we have projects that require a guarantee coverage that is less than 200m NOK?
- If applicants need guarantees that are less than 200m, then we encourage them to go through guarantee intermediaries. Norad can facilitate any introductions, if helpful (if so, please reach out to guarantees@norad.no).
- Are recipients of Norad’s Enterprise Development Scheme eligible for guarantees from the Sovereign Guarantee Scheme?
- Yes, organisations that already receive funding from Norad are still eligible to receive guarantees from Norad.
- We’re a newly established organsiation and don’t have access to audited accounts
- Please outline this as a reason in the application form.