Empowering Electric Utilities with Alternative Finance Solutions

The project is designed to strengthen electric utilities' financial standing in USAID's partner countries and to help them be better positioned to access sources of alternative finance. The global financial landscape is shifting to prioritize sustainability, and electric utilities are modernizing their investment approaches to launch critical infrastructure investments. There is a consequent need for USAID practitioners and electric utilities to better understand utility investment opportunities, so they can help utilities shift their investment approaches to prioritize sustainability and attract alternative finance. Alternative finance, including sustainable finance, climate finance, and capital markets, could help utilities fill the gaps left by traditional finance, unlocking the funding necessary for energy transition needs and sustainability targets. However, utilities face several barriers to accessing alternative finance. Utilities will need to achieve a baseline level of maturity to attract alternative investment. The Alternative Financing for Utilities Building Blocks are designed to help utilities in USAID partner countries and USAID staff improve their financial management, reporting, and governance, and market engagement so that accessing alternative finance can become possible. Traditional finance has been the primary source of funding for electric utilities in developing countries. Traditional approaches for electric utility finance have often been characterized by a reliance on public funding and government subsidies. The government assumes a central role in financing and managing electric utility projects, often leading to inefficiencies, lack of transparency, and financial strain on national budgets. State-owned utilities dominate the sector, with limited participation from the private sector, which can impede competition, innovation, and overall sector development. The Alternative Financing for Utilities Building Blocks are designed to help utilities overcome these barriers and access alternative finance. The building blocks are part of a larger SUPER Utility Finance project and are intended to be used by electric utility staff and USAID staff to improve their understanding of new sources of finance and how to access them. The building blocks can be used with the USAID Questions Guide for Alternative Finance to help identify key entry points to support utilities. By improving their financial management, reporting, and governance, and market engagement, utilities can become better positioned to access alternative finance and achieve their sustainability targets.