Call for Investment Proposals - Financial Support Scheme (FSS)

Background

The Government of Lesotho through the Ministry of Energy and Meteorology (MEM) and United Nations Development Programme (UNDP) call for Investment Proposals is part of the implementation of the “Development of Cornerstone Public Policies and Institutional Capacities to Accelerate Sustainable Energy for All (SE4All) Progress” Project in Lesotho. The project aims to catalyse investments in renewable energy-based mini-grids and Energy Centres, to reduce GHG emissions and contribute to the achievement of Lesotho’s Vision 2020 and SE4All goals. Further, the project will create a favourable legal, regulatory and market environment and build institutional, administrative and technical capacities to promote rural energisation through isolated mini-grids and Energy Centres. The project designed a Financial Support Scheme (FSS) and appointed United Nations Capital Development Fund (UNCDF) as the Fund Manager to manage and disburse grants for private developers in order to kick start the market for the renewable energy technologies and minimise the risk associated with capital investment.

UNCDF makes public and private finance work for the poor in the world’s 47 least developed countries. With its capital mandate and instruments, UNCDF offers “last mile” finance models that unlock public and private resources, especially at the domestic level, to reduce poverty and support local economic development.

Financial Support Scheme (FSS)

The purpose of the Financial Support Scheme (FSS) is two-fold. First, it is designed to jump-start the market for isolated PV/renewable energy mini-grids and Energy Centres by providing start-up capital and reducing the developers’ financial requirement. Second, it is to minimise any potential risk on the part of lenders in making loans for renewable energy-based mini-grids/Energy Centres to encourage more private finance for this type of projects by demonstrating acceptable levels of risk. Through FSS, the project aims to support establishment of 10 renewable energy mini-grids and 10 Energy Centres in the defined geographical areas. FSS services are available for the period of 5 years. Detailed pre-feasibility studies have been carried out for specific locations where the FSS supported projects are to be implemented. These pre-feasibility studies will be made available to the interested applicants on request.

Renewable Energy Mini-Grids

FSS targets renewable energy mini-grids with at least 18 kW of PV (or equivalent in terms of other RETs as indicated in the detailed pre-feasibility studies) installed at each of the 10 pre-identified villages as follows: Ketane (Ha Nohana) and Ribaneng in Mohale’s Hoek; Matsoaing and Tlhanyaku in Mokhotlong; Sehlabathebe (Mpharane) and Lebakeng in Qacha’s Nek; Tosing (Dalewe) and Sebapala (Ha Sempe/Lefikeng) in Quthing, Sehonghong and Mashai (Moreneng, St. Theresa) in Thaba-Tseka.

A mini-grid is an isolated, community-level system, separate from the main electricity grid network that consists of generation and distribution of electricity to consumers located in the vicinity. For renewable energy grids based on solar and hydro power, a battery storage system is typically included to balance supply and demand and intermittent generation patterns from renewable energy sources. In addition to the power generator, battery, and distribution network, a mini-grid may include a power conditioning unit consisting of junction boxes, charge controllers, inverters, distribution boxes and wiring/cabling, all located within a container or purposely constructed building.

The Financial Support Scheme (FSS) will provide direct support to the investors to:

• (i) design and install a mini-grid that will perform efficiently,
• (ii) make it easier for investors to mobilise debt financing through provision of de-risking capital in the form of an investment grant, and
• (iii) provide tariff relief to isolated rural consumers, just like those connected to conventional energy-based mini-grids.

Services provided by the FSS to each of the 10 renewable energy-based mini-grids

• (a) support the preparation of feasibility studies/business plans (FS/BP) and partial investment for isolated renewable energy-based mini-grids. This will be achieved through the provision of a grant, to eligible project developers selected on the basis of competitive bidding, with an amount of up to 50% for each of the costs involved for the feasibility study/business plans and the investment grant, with a maximum per project allocation not exceeding $60,000.
• (b) to establish a performance-based incentive (PBI) fund (a subsidy that is also referred to as OBA – output-based aid) that will be paid directly to the project developer, based on actual energy production of the PV or renewable energy system with a maximum per project annual allocation not exceeding $7,500 for a period of up to 4 years.

Energy Centres

FSS will support the establishment of 10 village Energy Centres, with each serving at least 5 surrounding villages in the following locations: Phamong (Central) and Koebunyane in Mohale’s Hoek; Mateanong and Malingoaneng in Mokhotlong; Matebeng (Ha Lelignoana) and Melikane (Thuoeleng) in Qacha’s Nek; Majara and Qhoali in Quthing; Linakaneng and Ha Mokoto (Litsoetseng) in Thaba-Tseka.

Energy Centres present an interim solution to “off-grid” villages while they await the establishment of (mini-)grids in the future by offering access to electric and non-electric energy sources. They can help consumers to save cost of transportation and time facilitating their access to such non-electrical energy sources as kerosene, LPG, candles, portable LED lights etc. Energy Centres may also feature power charging facilities. In this project, only renewable energy driven power chargers are covered. Customers living in the vicinity of the Energy Centre may charge their mobile phones, lanterns, radios and other battery driven devices. Also other forms of modern energy and their applications are supplied like e.g. PV-operated portable LED lights, solar mobile phone chargers, solar home systems, energy efficient cook stoves, etc. Energy Centres help to disseminate modern lighting, cooking and heating solutions to rural areas which do not have access to these modern services and technologies.

Services and products offered by the Energy Centres may include:

• • Battery charging – Battery packs can be recharged allowing community members to bring in batteries for recharging.
• • Renewable energy technologies and appliances; solar home systems, solar powered LED lanterns, radios, TVs, etc.
• • Energy efficient products – improved cookstoves, insulated cookers, etc.
• • Internet – one of the primary revenue generators is selling internet access. The EC can function as an ISP and sells internet WiFi vouchers. An internet router can be installed at each EC creating local hotspots.
• • Airtime – selling airtime for phone will be critical for generating foot traffic to the EC.
• • Printing – The EC can also offer printing services. This will be a very popular service for schools, students and local community as it will help with university applications, test printing, job applications etc.

Services provided by the FSS to energy centers

At the end of each year of operation, each Energy Centre will be eligible for a subsidy in the amount of $7,500 for a period not exceeding 4 years, subject to demonstrating proof that they facilitate access to modernised energy services to the communities they serve. However, the total subsidy to each Energy Centre by the end of the project should not have exceeded 50% of the initial cost of its establishment.

Eligibility criteria for Renewable Energy Mini-Grids and Energy Centres

As the project developer, you are required to be the main designer of your system and its technology. The main project driver should be costs and quality, including consumer health and the environment.

Dimension	Criteria
Geographical Coverage	Qualifying project proposals should be implemented within the identified locations in Lesotho as specified above.
Project type	• Solar or hydro mini-grids or Energy Centres (interchangeable) • It is permissible to substitute one type of a project (e.g., a mini-grid) with another type of a project (e.g., an Energy Centre) provided both types are comparable in terms of the overall coverage of facilities/households.
Applicant	• A legal person and a specific type of organisation such as: private company, non-governmental organisation or research institute with registration in Lesotho. • Can provide, either from its own resources or in combination with other shareholders, contribution (in kind or in cash) equal to at least 20% of the total cost of the project.
Prior Experience	• Track record and requisite skills in delivering energy services in rural communities through isolated renewable energy-based mini-grids or Energy Centres and other energy access schemes.
Renewable energy-based source	• Source must be either solar or micro-hydro.
Financing	• For mini-grids, the project developer must indicate sources of complementary funding required to cover total project costs including feasibility studies and business plans beyond the maximum grant of $60,000. • For Energy Centres, the project developer must demonstrate availability and sources and funding for the total project cost.
Qualified management	The proposal should show evidence that the proposed management team has the necessary technical and managerial skills to oversee the successful setup, sustainable operation and maintenance of the mini-grid or Energy Centres.
Business models	The project developer should indicate a sound business model demonstrating that there is a long-term business opportunity with solid after-sales services as opposed to a more short-term project opportunity.
Socio-economic conditions	Priority will be given to those applications that demonstrate reduction in climatic and ecological impacts.
Development Impact	Proposal must show how the business will generate positive benefits to the community and local economy at large, e.g. reduction of GHG emissions, job creation, income generation, access to energy equipment etc.
Innovation	Applicants are encouraged to integrate tried and tested ‘innovations’ in their proposal. Such innovative actions would include, but not be limited to, financial mechanisms such as crowd funding and mobile banking, innovative solutions to after-sales services, innovative household energy solutions and innovative actions for the mobilisation, communication and in-house training of the population (community?) before, during and after installation of an energy solution.
Scalability	The potential for scaling-up of rural energy activities and contributing towards poverty reduction, will be important considerations. Demonstration of the successful deployment, along with proof of capacity to replicate/upscale, will therefore be critical.
Productive Use of Energy	Actions aiming at increasing access to energy services for local productive activities so as to promote economic growth, generating jobs and consequently increasing the affordability of an energy service will also be considered an advantage.
Compliance	Compliance with Lesotho laws and regulations and UNCDF/UNDP Environmental & Social Performance Standards including human rights is a must.

Key evaluation considerations

• Sustainability: the proposed (distributed) energy service strategies and the accompanying business frameworks must be commercial and sustainable. The plan should include longer-term projections, revenues, costs/overheads, breakeven, etc.

• Replicability: the distributed energy service solution should be replicable, representing a business solution that is relevant to and implementable in other districts in Lesotho.

• Product/technology selection: project developers must work with proven technologies that are preferably, where possible, certified. The intension of this CfP is not to test or pilot technologies/products but rather to test and mature the business strategies that support their dissemination.

• Developer’s own contribution: the developer is expected to provide contribution (in kind or in cash) equal to at least 20% of the total cost of the project.

• Project developers are welcome to propose business strategies focused on single or multiple technologies/products and services.

• Impact and cross-cutting issues: project developers are encouraged to develop solutions that have broader socio-economic, environmental, commercial and gender impacts.

Pre-submission workshop for prospective applicants

UNCDF will offer a half-day session to guide applicants on submission requirements on 20^th May 2019 at UN Conference Hall. The purpose of this session is to allow applicants an opportunity to raise questions and for UNCDF to provide guidance on how applications should be submitted and to increase the understanding of the applicants on the eligibility and selection criteria.

If you wish to participate in the pre-submission workshop, please send an email to ls.procurement@undp.org with the subject “FSS Pre-submission workshop”.

Please note that you are not required to participate in the session in order to submit a proposal. This is merely a service provided by the FSS management team.

Instructions for submitting proposals

Only properly completed submissions will be reviewed. A complete submission consists of the following submission form where the applicant must fill out all sections:

1. The Call for Proposal Submission Form (Word) which can be downloaded at www.ls.undp.org.

Any supporting documentation must be submitted in separate documents. The word submission form must be submitted in their original formats (Word) along with any supporting documentation to the following recipient: ls.procurement@undp.org with the subject line “FSS APPLICATION”. The lead applicant may submit proposals for more than one site under this call for proposals, and may be awarded more than one site.

IMPORTANT NOTICE

1. Language of proposal: Proposals must be submitted in English

2. Deadline for submission: The deadline for submission of the investment proposals is 14^th June 2019.

3. Please note: Applicants who do not submit the word submission template in its original format within the deadline will not be considered, and successful applicants will be contacted after the deadline.

4. Successful longlisting: FSS management team will endeavour to inform Successful and Unsuccessful applicants for the longlisting by 12^th July 2019. Those applicants who will not have been contacted by then should consider their proposals unsuccessful.

5. Successful shortlisting: FSS management team will endeavour to inform Successful and Unsuccessful applicants for the shortlisting by 30^th August 2019. Those applicants who will not have been contacted by then should consider their proposals unsuccessful.

6. Inquiries: For additional inquiring about the application process please send your inquiry to: ls.procurement@undp.org with the subject “INQUIRY”.

7. Acknowledgement of receipt: FSS management team will acknowledge receipt of your email by replying to the email address from which the application was sent.

8. Selection Criteria: FSS management team will use the criteria as defined in the FSS guidelines in evaluating the proposals for long listing and short listing.

Documents:

re-Feasibility Studies for Mini- Grid and Energy Centres

in Lesotho:

• Methods and Assumptions

• Mohale's Hoek District

• Qacha's Neck District

• Quthing District

• Mokhotlong District

• Thaba-Tseka District

Frequently Asked Questions

Also, Please download the Presentation here.