7-8 JUNE 2017 / Tour & Taxis / Brussels

De-risking and scaling up sustainable investments in the African power sector - the Africa GreenCo model

De-risking and scaling up sustainable investments in the African power sector - the Africa GreenCo model

Africa GreenCo Africa Green Regional Energy: Efficient, New and Creditworthy Offtaker

debate
D7
Wednesday, June 7, 2017 - 14:00 to 15:30

Key points

  • The need for additional electricity generation in Africa is vast and to achieve this will require up to € 90 billion investment up to 2025.
     
  • The creditworthiness of utilities is a big issue as is the fact that up to 70 % of revenue from energy consumption is not collected.
     
  • The current project-by-project approach to electrification of the continent is unsustainable.
     
  • Solving the Africa energy challenge will need bold, innovative and serious ideas, all executed passionately.
     
  • Rehabilitation of utilities is key but sustainable and material improvements can only occur in the medium to long term.
     
  • Putting the burden on governments to provide explicit and implicit guarantees or counter-guarantees shifts the creditworthiness issue to the sovereign level.

Synopsis

This panel debate focused on the need for significant additional electricity generation capacity in Africa and the current lack of a viable power market to sell electricity production.

Both of these factors present serious obstacles to achieving sustainable power sector development in Africa’s energy markets. Participants were told that the current weak financial position of utilities and a limited choice of an alternate buyer often deter private capital.

One speaker said that an intermediary aggregator between buyers and sellers could help attract sustainable investments in the power sector.

One member on the six-strong panel reminded participants that Africa is not a single country, of course, but a continent of 54 countries, each with a regulatory policy framework.

A lack of creditworthy counterparties for generation projects is only one problem facing the energy sector and the current project-by-project approach to electrification of the continent is unsustainable. No single project, however, is enough to shift the attitude of commercial investors to bankability; a systemic and structural change is required.

One current example of best practice, and a particular success story in Sub-Saharan Africa, is Africa GreenCo. This project aims to increase private sector investment in energy generation in Sub-Saharan Africa by mitigating the credit risks associated with the current lack of creditworthy off-takers.

The aim is to increase the supply of, and demand for, finance for energy projects and to mobilize private sector capital more quickly.

The role of Africa GreenCo as a financially sustainable intermediary off-taker and power trading company can stimulate regional electricity trading and facilitate more efficient use of available and new resources, one speaker said.

The discussion was told that this initiative can address several critical issues, including reducing pressure on utilities as well as financial liabilities for governments. Unlike current development efforts that mostly focus on project preparation, advocacy or capacity building, Africa GreenCo has introduced a principal in the market which addresses the core issue of creditworthiness of off-takers and the lack of a viable power market to sell electricity production.

Africa GreenCo, it was noted, represents an ambitious attempt to help increase the liquidity and scale of regional power trade and develop the power pools in Sub-Saharan Africa. It does so by providing the first ever government co-owned, independently managed and financially sustainable electricity service provider.

The debate also touched on what is known as blended finance which exists to establish risk return profiles. This can help secure more investment that, in turn, might achieve at least some of the Sustainable Development Goals (SDGs).

The theme was picked up by another speaker who said there is currently a significant funding gap in achieving the SDGs, which means more needs to be done to engage the private sector, including the big investment banks, in Sub-Saharan Africa.

Financial engineering is not necessarily the answer but, rather, more work is needed to address the underlying myriad risks facing Africa’s energy market.

Insight

Regional integration and renewable generation will reshape the energy landscape in Sub-Saharan Africa over the next 25 years.

Organised by

Supported by

    Penny Herbst
    Non-Executive Director
    Africa GreenCo
    Adam Connaker
    Program Associate
    Rockefeller Foundation
    Chris Clubb
    Managing Director
    Convergence
    Seyni Nafo
    Chair of the African Group of Negotiators at UNFCCC
    United Nations Framework Convention on Climate Change
    Ana Hajduka
    Founder & CEO
    Africa GreenCo
    Roberto Ridolfi
    Director for Sustainable Growth and Development
    European Commission - DG for International Cooperation and Development
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