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ADDRESSING CHALLENGES in PPP in the Power SectorA Private Sector Perspective

The High Level Workshop on Public Private Partnerships Implementation in the Energy Sector in Africa: Challenges, Best

Practices and New Trends

Jason RosamondCEO

Good Earth Power

Addis Ababa | EthiopiaJune 30 – 1 July, 2011

Copyright © 2010 Good Earth Power. All rights reserved

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Table of Contents

The Challenges of Financing Power and Green Technologies in Africa

The Responsibilities of PPP Partners: IPPs, Governments, Financiers, Institutions

Case Study: Mozambique

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The main challenges in African power sector PPP: A private sector perspective

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• Green Technologies are not the Status Quo

• Governments, institutions, financiers, and the ‘old guard’ focus on what they know – ‘Proven’ technologies and projects

• Proven technologies, however, do not address many of the needs of governments‒ Implementation timelines‒ Environmental policies‒ Off-grid capabilities / Rural electrification

• Green Technologies address some of these issues but face their own challenges‒ Sub-scale and therefore marginalised in discussions‒ Still being developed in the West where tariff incentives are higher‒ Financiers still taking the ‘low hanging fruit’ – why invest in less attractive investments

in Africa given all of its challenges when I can still invest in Europe‒ Governments are still seeking ‘free’ implementations, concessionary loans, world bank

approvals – none of which are tied to ‘unproven’ green technologies

How do we join hands in PPP to overcome these challengesHow do we join hands in PPP to overcome these challenges

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The green technology IPP must play a role, but needs to be armed for battle

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• The right technology – clean and green

• The right price – it must be competitive with fossil fuel alternatives

• Favourable implementation timelines – months, not years

• Proven track record elsewhere – a first time pilot in Africa is unrealistic

• Insurance package: EPC insurance and performance warranty

• Financing package: bring a financier to the table, at least in principle with a self-financing model

• Scalable: it must be capable of making an impact

• EPC partner: proven global EPC partner to ensure implementation success

Overcome the hurdles before they ariseOvercome the hurdles before they arise

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The government must rise to the challenge…for the right IPP

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• Provide government guarantees with collateral if necessary‒ The government is responsible for collecting payment from end customers (unlike ICT), so out of IPP control‒ As the IPP I bring a guarantee to the partnership, so should government

• Publish REFIT tables‒ Don’t worry about IPPs making too much profit – publish what you can afford‒ Implement social scorecard to catch ‘excess profit’

• New business models – subsidise local consumption with industry purchase and export‒ Establish bi-lateral agreements on behalf of PPPs with IPPs‒ Go in partnership with IPPs to industry players to generate shared returns from which government subsidises

local power

• Introduce promising new technologies to ‘trusted partners’ if you fear implementation capability

• Create an entity to share the responsibility of corralling government stakeholders (regulator, municipalities, communities, environmental agency, national power company, Ministry of energy…) – as they all induce delays in the process

• Accept successful projects in other countries as ‘proven’ technologies

• Focus on self-funding, sound projects and let nothing inhibit success

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Financiers and Institutions

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• Financial Institutions‒ Go hand-in-hand with technology partners which are proven

‒ Push governments to allow time to conclude project finance

• Regional Development Agencies‒ Share learnings across regions

‒ Actively promote successful PPP projects across borders

• Donors‒ Invest capital on behalf of government in financially viable projects as subordinated debt

‒ Support self-financing initiatives by providing government guarantees

• World Bank‒ Support self-financing initiatives by allowing government guarantees

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Case Study: National Electrification Plan

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• Large scale, staged development of 1,500 – 2,000 MW over 24-36 months

• Rural Electrification (needed for MDGs) - off-grid capability

• Subsidise local consumption through PPP joinly using the ‘Robin Hood’ approach: high tariffs to industry (uninterrupted power supply) to subsidise consumers

• Social Reinvestment: 50% of profits reinvested in government programs to help alleviate concerns about whether the tariff is ‘perfect’

• We bring the technology, capability, financing, insurance, scalability, job creation, social investment and desire…

• …we seek government supporters!