Godwin Emefiele’s term as governor of the Central Bank of Nigeria (CBN) officially ends on 2 June. His dual exchange rate structure, which the IMF has long urged Nigeria to scrap, may not last much longer.
Juan Laso of Alten Energías Renovables explains the difficulties of getting renewables projects off the ground
The Spanish renewable energy producer has big plans for sub-Saharan Africa, with projects in Namibia, Kenya and Nigeria. Executive president Juan Laso describes the lay of the land.
Compared to its European neighbours, Spain is not particularly known for its presence in Africa. But in renewable energy the Spanish are almost everywhere. “We are very strong in this field,” says Juan Laso, executive president of Alten Energías Renovables. “We started installing solar in Spain around 2007. In 2008, Spain alone was 50% of the global market, at 2.5GW. Now, you can find Spanish people in Chinese manufacturers and [renewable energy] companies all over the world.” Spanish company SENER is involved in some of the projects at Morocco’s flagship Noor solar development.
Independent power producer (IPP) Alten Africa, a fully owned subsidiary of Alten Energías Renovables, is focusing its efforts south of the Sahara. By September 2018, Alten Africa expects to start commercial operations at a newly built solar plant in Namibia. Situated in the Hardap region, south of the capital, Windhoek, it should pump out 112GW of clean electricity per annum. “We reached financial close with Standard Bank and [French development finance body] Proparco. And now we are starting the construction of the project,” says Laso.
Alten Africa is also active in Nigeria, where it has a power purchase agreement with Nigerian Bulk Electricity Trading. Nigeria brings more administrative headaches than Namibia: “There is a new version of the government guarantee. There are some processes ongoing for the stabilisation of the electrical system to reinforce the bankability framework.”
As in many African jurisdictions, getting the proper guarantees is critical for accessing long-term funds. Alten Africa is applying for the World Bank’s Political Risk Guarantee and Multilateral Investment Guarantee Agency schemes. “Every market has its difficulties,” says Laso. “In Namibia with NamPower, there are no guarantees from the government. [But] NamPower has a very good track record. In Kenya […] we have an off-taker, Kenya Power and Lighting Company, with a good reputation for dealing with IPPs.”
In Nigeria, the guarantees required include clauses about losses due to corruption. “It’s clear that the financial stability and experience of the off-takers are key to have a better environment and cost of the project,” says Laso.
Alten Energías Renovables is also investing in Latin America, giving it a unique perspective on developing projects on two continents. The contrast between African countries and Mexico is stark due to the size of Mexico’s economy, the strength of the country’s main utility company and a newly overhauled regulatory framework. “It has created a lot of appetite for Mexico […]. You can find a significant number of banks interested in those projects. And the grid is well managed,” says Laso. “In Africa, it’s more difficult. The grids are weaker, and also frameworks are weaker. It needs more work. They are not so experienced in these countries.”
Laso remains positive that Alten will be able to find banks in Nigeria interested in financing renewable power projects, despite many local banks getting their fingers burnt lending to the power sector a few years ago: “I am absolutely sure [we will find bank financing in Nigeria] once we have the framework that we need,” he says.
In Nigeria, the bulk of funding will come from international sources. Alten Africa has partnered with South African investment fund Evolution II to bring a bigger balance sheet – and experience in green energy – to its project pipeline. The goal: “To have in five years’ time, by the end of 2022, around 500MW under construction, having reached financial close and operating in sub-Saharan Africa”, concludes Laso.