Financing IPPs in the Age of Transition

Joanne Elson, a senior associate in the firm's finance practice in London moderated a panel discussion on "Financing IPPs in the Age of Transition" at the Africa Investment Exchange (AIX) Power & Renewables event, which took place in London in November.

Joanne was joined by distinguished panellists: Andreas Cremer (Director, Infrastructure & Energy, DEG), Conal Duffy (Vice President, Alliant Insurance Services), Oti Ikomi (Founder, CEO and Executive Vice-Chairman of Proton Energy), Erik Granskog (CEO, Milele Energy) and Tom Jamieson (Partner, Bracewell), each of whom has worked in the African IPP sector for many years.  The panel shared industry insights and their perspectives of the realities of investing in African IPPs. Some key discussion points are highlighted below:

The role of natural gas

The role of natural gas in Africa's energy transition was keenly discussed by the panellists. With the discovery of sizeable natural gas resources across Africa, notably in Egypt, Mauritania, Senegal and significantly in the United Republic of Tanzania, Cote d'Ivoire and Mozambique, the continent has vast potential for indigenous gas. The discussion raised some important questions, including whether the level of current investment in renewable technology is sufficient to warrant the replacement of thermal generation, and whether thermal generation, and in particular gas IPPs, will continue to attract investment on the continent.

^{From L-R: Andreas Cremer (Director, Infrastructure & Energy, DEG), Joanne Elson (Senior Associate, HSF), Conal Duffy (Vice President, Alliant Insurance Services), Erik Granskog (CEO, Milele Energy) and Tom Jamieson (Partner, Bracewell). Absent from the image: Oti Ikomi (Founder, CEO and Executive Vice-Chairman of Proton Energy) joined the panel discussion via video conference.}

Risk transfer options

Global investment in renewables in Africa operates below its potential, with market barriers and the perception of high risk preventing private investors from increasing their involvement in renewable energy finance. The perceived risks include political, regulatory, grid transmission and offtaker risks, among others. The panel considered the risk transfer options which are available, and whether the type of risks investors are concerned with are shifting, or should be reconsidered.

The impact of the COP26

Following the recent outcomes of the COP26 summit, the panellists shared their thoughts on how the policy decisions made by countries at the summit will impact on the ability of certain Western countries to invest in thermal generation, and in particular the moral issues that will need to be raised and debated going forward.

Quick action may be necessary

One of the recommended actions which the panellists shared with the audience was the need to work quickly to secure the necessary financing for the development of natural gas projects on the continent - while certain Western countries are still able to invest.

For more information, please contact Joanne Elson.