African renewable projects
require a stable investment
environment

Regulatory certainty and supportive policy frameworks are needed to support investments in renewable energy projects in Africa.

A clear, predictable and supportive regulatory framework, backed by a stable investment environment, will be key to attract investors and funders to renewable energy and power projects.

Another important consideration is a viable tariff, which provides an equitable Return on Investment to the investor commensurate with the risk of an Emerging Market – while at the same time making it affordable for the end user.

Project Financing is credit-intensive, a multitude of risks have to be considered. Risks have to be carefully assessed and appropriately mitigated. This is a pre-condition for debt and equity funding to be secured.

As utilities may not be the most credit-worthy or financially robust entities, some form of credit enhancement to backstop the utility is required. This could take many shapes or forms. For various reasons, Government Guarantees may not always be possible.

Tariffs have to be scrutinised carefully. Many first-world countries have subsequently revisited tariffs that they initially signed-up to in their PPAs.

The lesson is becoming clear: when tariffs look too good to be true (culminating in enormous returns for developers), they probably are.

Absa already has a solid track record as the pre-eminent regional bank in providing funding for renewable energy and conventional power projects.

The bank has closed several deals in Africa in the last several years and is now very adept at understanding the risks associated with power projects, bringing its vast experience to bear to successfully structure, fund and close complicated multi-sourced, multi-tranched project financing deals.