Energy and infrastructure project bankability in Africa: making the right choices

by DLA Piper
Contact

DLA Piper

During Africa Week, and in association with FTI Consulting Inc., and along with many friends and associates, we explored the myriad of factors influencing investment decisions in energy and infrastructure project success in Africa. What makes a project viable and successful? How do investors assess options? What do project developers need to do (and avoid) to attract funding? What are the risks?

Despite inherent challenges, the African continent offers investors and developers of energy and infrastructure projects a multiplicity of opportunities. Access to power and infrastructure are critical enablers for economic growth and development across the continent, improving quality of life for its people and providing opportunities for both African and international businesses.

Energy and infrastructure projects in Africa are often part of much wider government plans and so are inherently subject to risks. Most projects run for five to 20 years and have major social economind political implications; they last a long time and outlast different political cycles. As a result, project participants must be realistic in anticipating that adverse publicity may occur at some point in the project lifecycle. If the project is fundamentally viable, then it is more than likely able to defend itself, making challenges surmountable.

What are the factors influencing risk?

Being aware of the risks and managing them carefully can result in a successful project for all parties, even in frontier markets, post-conflict countries and fragile states. Choosing the right location, understanding political environment and regulatory regime, choosing the right partners and effective community engagement all play a huge role in influencing the chances of success.

How are risks assessed and managed?

First and foremost, undertaking an in depth risk assessment of the domestic market is essential in selecting the best jurisdiction for a project. Of course, thorough due diligence on the project is also essential. Confidence can be gained from ensuring the project is of strategic importance to the host government, even though investors and developers need to be simultaneously cognisant that many projects are inherently politicised and with that comes risks that are often unavoidable. It is commonplace for governments to hold a stake in the project, for example, and it is important they remain committed to their respective contractual obligations, e.g. in respect of payments due to be made under a PPA.

Identifying an appropriate government support mechanism is crucial to ensure that future governments remain steadfast to their contractual commitments. Should the government not do so, there are particular challenges associated with disputes involving host governments. Assessing, and taking steps to mitigate the impact of those challenges is an important part of that in-depth risk assessment and pre-investment planning, be it through structuring an investment to benefit from treaty protection, including specific protections such as stabilisation clauses, and negotiating an effective dispute resolution clause which enhances the prospects of recovery.

When it comes to selecting project partners, one of the key considerations is to ensure that a local partner is able to manage both domestic issues and navigate complex financing structures. Testing partner depth of sector knowledge and experience is also essential.

Finally, effective community engagement should be considered critical to ensure project success. Land and relocation issues often come into play when local communities are affected, particularly in relation to the need to fund housing and economic opportunities which can - up to a point - be provided by project companies, developers and DFIs. Project investors are increasingly becoming more adept at monitoring the flow of cash to ensure it is received by those impacted - and that it is appropriately used. Indeed failure to effectively engage with local communities can pose significant security and political issues, underlining the importance of fully understanding the local environment in which you are working. And, it is important to point out, that community engagement should not be limited to the development stage of the project, but in fact its entire lifespan to manage the ongoing impact of the project on the local people.

Our thanks go out to our panel participating in this: Pamela Wadi, Director, FTI; Emilio Cattaneo, Executive Director, The Emerging Africa Infrastructure Fund and Elenos Karaindros, General Manager: Strategy & M&A, Mytilineos. Dimitri Papaefstratiou, Partner & London Head of Energy and Infrastructure Projects at DLA Piper chaired and James Carter, Partner, International Energy Disputes at DLA Piper contributed.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© DLA Piper | Attorney Advertising

Written by:

DLA Piper
Contact
more
less

DLA Piper on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.