REFUND
Objective of the Fund. As per the Act that created the Rural Energy Fund, its objective is to provide for the coordinated and sustainable financing of projects and programs for the development of rural and/or renewable energy projects and delivery of modern energy services for rural development in a manner such that the Fund becomes a channel through which domestic and international financial resources intended for rural and renewable energy delivery in Liberia shall be managed.
Financial management and asset ownership. REFUND is not a single bank account into which funds are paid and disbursed. It is a financial management system for channeling various sources of funding in a coordinated manner. Additionally, given the important role of grant based funding and the fact that many donors can only fund public held assets, it will be necessary for REFUND to own part of the assets and lease them to private Distribution Companies.
Transparency, accountability and use of funds. Transparency and accountability is critical for donors. Also most donors want and need to decide on which investments their contribution will be applied to. As currently the resources of REFUND can be used to pay operational costs and remunerations many donors prefer to manage their grants independently. Towards the future, REFUND shall allow donors to direct their contributions to separate accounts directly linked and only used in specific projects. Also, operational costs shall be paid only by Sector generated revenues and not by Donor contributions.
REFUND revenues. REFUND operationalization requires the creation of stable sources of revenue. The Power and Petrol Contribution to REFUND will be created. The PPC consists of a small levy (initially 1% of final price) charged to electricity generators and diesel/gasoline wholesalers. Additionally, REFUND will charge a Lease Fee to Regional Distribution Companies for the assets owned by REFUND and managed by the Regional Distribution Companies. The Lease Fee – to be agreed with LERC - will depend on the calculated tariff level and on the results of revenue collection, mitigating demand risk and reducing tariff differences among Distribution areas.
Credit lines with local banks and Partial Risk Guarantee. REFUND will promote the creation of several credit lines to be made available by local banks to promote acquisition of efficient appliances, financing of grid connections, household internal wiring or other grid growth investments as well as innovative business models and activities. REFUND will reduce risk and will only be used as a guarantee mechanism to support 50% of the eventual defaults.
Risk mitigation for renewable off-taking. The use of REFUND as a means of risk mitigation for renewable off-taking will be explored either through the creation of ESCROW accounts to secure payments or as an interface for Partial Risk Guarantee schemes with multilateral organizations.