The Ministry of Foreign Affairs’ plans and strategies

103 Document 3:12 2013–2014 Report loans on particularly favourable conditions IDA loans. The annual budget proposi- tions nevertheless emphasise that the least developed countries, particularly countries in Sub-Saharan Africa, must be prioritised. 151 A review of Norfund’s investments in renewable energy shows that 64 per cent are made in the upper middle-income countries Chile, Brazil, Panama, Peru and South Africa. Of these, only Peru was within the threshold set by the Storting at the time of the investment. 152 With the exception of South Africa, the aforementioned investments were made by the subsidiaries SN Power and Agua Imara. In an interview, the Ministry of Foreign Afairs stated that SN Power and Agua Imara may invest in any country that has been approved as a recipient by the OECD’s Development Assistance Committee ODA-eligible countries. These countries also include upper middle-income countries. 153 It means, however, that the countries in which SN Power and Agua Imara have invested, have a per capita GDP that is up to three times higher than that of the countries speciied in the Norfund Act. Proposition No. 1 2008–2009 to the Storting pointed out that some of Norfund’s investments through SN Power were made in countries that were not within the upper limit set by the Storting. In the proposition, the Ministry concludes that ownership of SN Power should continue, provided that the ownership interest in SN Power is used to beneit a particular focus on developing clean energy in Africa. The committee had no comments on this point in its recommendation. According to Proposition 1 S 2012–2013, Norfund can also invest in all ODA- eligible countries. In an interview, Norfund stated that they have a positive view of the Ministry of Foreign Afairs’ removal of the restriction on where the Fund may invest. According to Norfund, the change will not have any practical impact on the compa- ny’s activities, since the strategic focus that investments in renewable energy shall prioritise Sub-Saharan Africa and the least developed countries, will remain unchanged. In April 2013, Norfund pointed out in a memorandum to the Ministry of Foreign Afairs that development aid reporting gives a wrong impression. All Norfund’s investments are currently reported to OECD’s Development Assistance Committee as aid Oicial Development Assistance, ODA 154 . This means that 40 per cent of SN Power’s investments are recorded as aid because Norfund’s stake in the company is 40 per cent. The size of Norfund’s direct contributions to SN Power’s investments does however vary. SN Power’s investments can be inanced by loans or returns from previous investments, and therefore do not depend on transfers from Norfund to the company. Norfund pointed out in an interview that funds should be reported as aid the moment the Storting allocates funds to Norfund, and not as Norfund’s investments. The table below shows how such a change would be relected in aid statistics. 151 See for example the budget propositions from 2001–2002, p. 119; 2005–2006, p. 162; and 2010–2011, p. 184. 152 See table in Annex 3. 153 The criteria for which countries can receive aid or Official Development Assistance ODA, are defined by the OECD’s Development Assistance Committee DAC. 154 Official Development Assistance ODA is the OECD term for transfers of loans, gifts or technical development assistance that public authorities give directly to a developing country state to state or to multilateral organisations like the UN and the World Bank. Source: www.norad.no. 104 Document 3:12 2013–2014 Report Table 5 Annual Storting appropriations to Norfund and Norfund investments reported as aid Year Appropriated by the Storting new equity Part of the appropria- tion from the Storting earmarked for invest- ments in renewable energy Norfund’s invest- ments reported as development assistance in NOK 1000 Norfund’s invest- ments in renewable energy reported as development assistance in NOK 1000 2013 NOK 1.180 billion At least NOK 590 million 50 2012 NOK 1.030 billion At least NOK 515 million 50 1 647 939 1 232 964 2011 NOK 1 billion NOK 485 million 1 715 903 681 038 2010 NOK 629 million – 716 012 305 028 2009 NOK 585 million – 351 203 –106 004 Source: Letters of allocation to Norfund 2009–2013 and Norad’s Norwegian Aid Statistics database. In addition, NOK 6 million were earmarked for the hydropower project in Fula Rapids in South Sudan. 105 Document 3:12 2013–2014 Report 6 Assessments A key goal of Norwegian development work is to reduce absolute poverty and lift people permanently out of poverty. Development of the energy sector is a prerequisite for developing countries to achieve economic growth. Increased access to clean energy at an afordable price is important in the ight against poverty, and according to the Standing Committee on Foreign Afairs, Norway’s commitment to clean energy must include poverty-related measures and production of electricity from renewable energy sources. Through bilateral aid, the Ministry of Foreign Afairs has provided support to build hydropower plants, either as direct support or through the investment fund Norfund. This has helped increase power generation in recipient countries. However, the audit shows that little direct support has been given to hydropower development in the seven clean energy core countries since 2000. Nor has support to the investment fund Norfund resulted in power development in the core countries. The audit shows that Norwegian aid in the form of support for the development of central and distribution grids has helped to increase access to electricity. Meanwhile, the energy aid did not reach the poor to any great extent in 2000–2013. Few poor households connect to the power grid, and the Norwegian focus on increased produc- tion and distribution of energy has had a marginal impact on increasing business activity and employment. Only a small proportion of the energy aid directly funds measures for poor people in the core countries.

6.1 Norwegian development assistance has contributed little to increase access to clean energy

In Recommendation No. 269 2008–2009 to the Storting, the Standing Committee on Foreign Afairs pointed out that Norwegian aid shall prioritise the development of hydropower, wind farms and solar parks for the production of power for the grid. Development of power plants requires large investments. The audit shows that the embassies provide little direct support for development, but support preliminary analyses that map the feasibility of projects and facilitate private investment and the development of national legislation. This approach has resulted in few development projects in the core countries and has consequently done very little to increase power generation. The audit also shows that hydropower is still the main focus, although countries have ample opportunities to utilise solar and wind energy resources. Focusing solely on hydropower makes the recipient countries more vulnerable to failures in the energy supply than a broader focus on hydropower, wind and solar energy. In Proposition 1 S 2013–2014, the Ministry of Foreign Afairs underlines that the Norwegian Investment Fund for Developing Countries, Norfund has played a key role in recent years in the government’s commitment to renewable energy, and that it will be an even more important tool in this area. Norfund has a development policy mandate and is to contribute to the realisation of projects that private companies would not otherwise not have become involved in because of high risk. At the same time, individual investments must be proitable to enable the business that is established to be viable.