Fieldstone Africa Newsletter - Q2 2017

Dear Clients and Friends of Fieldstone Africa,

We are back at our desks after the annual trek to the Africa Energy Forum (AEF), which was held in Copenhagen this year. 

The conference was on a smaller scale than the previous year, with over six hundred fewer attendees. Perhaps, the greatest single issue driving this decline is the continued impasse regarding South Africa’s Renewable Energy IPP Procurement Programme.

Image: AEF 2017

Image: AEF 2017

The programme accounted for a large portion of the completed generation projects on the continent over the past few years and became a role model for other renewable efforts worldwide. Based on presentations at the conference, there is no indication that the Government of South Africa recognises that there may be risk in blocking these projects that can add generation in the near term, nor do that it seems to fear the chilling effect on international investment, generally.

Somehow, the balanced approach to new generation that had been the hallmark of the South African system has been usurped by other considerations, which may not be directly related to the electricity system or economic needs of the country.  Subsequent statements by the Department of Energy suggest that the situation is not likely to be sorted out until some form of political equilibrium is reached in the country.

Elsewhere in Africa, there continues to be slow progress - too slow, given the need and common insight that additional generation is a prerequisite to growth. Certain investors attended AEF last year based on the belief that governments would share this view and provide the needed backstop support to drive projects forward. Unfortunately, many governments listened to market (consultant and lawyer) buzz to the effect that guarantees and support letters are no longer required.

The idea of circumventing basic credit fundamentals is attractive to countries of limited means.  Avoidance of government support requires credit worthy offtakers which could be a local utility, or multiple players in a properly structured market, for trading power. In either case, the threshold will be easier to achieve where the project can be funded in local currency. Without this, they must stand behind any project of scale to reach completion. The time and opportunity cost of listening to this siren call is great and waiting is a poor option.

As is true every year, the real value of AEF was the chance to have discussions with private capital providers, development finance institutions and government representatives that might move the market forward. It was encouraging to see so many parties thinking imaginatively about localisation of funding. The goal is to tap into local sources of capital – pension funds and even direct retail investment. Such investments should be excellent predictable annuities. 

With a large enough local component, the requirement that projects be dollarised could be limited or removed completely as local investors are hedged against currency risk. The reinvestment in the system can serve as a stabilising force for countries and as a healthy alternative to capital flight. Fieldstone Africa is at the forefront of advocating structures that encourage such development.

 In other news from Fieldstone Africa:

  •  Ziyaad Sarang and Kavi Pillay assisted in a number of transactions related to acquisition of stakes in renewable projects in Sub- Saharan Africa on behalf of Hulisani Limited, a JSE-listed Pan-African Energy vehicle that began trading officially at the beginning of 2017. Fieldstone Africa is proud to support the efforts of this landmark vehicle as it continues to grow its asset base in the energy and related infrastructure sector.
  • Fieldstone Africa was named Project Development Advisor of the Year, at the Ai Investor Awards function held on 5th May. The recognition was for our work on the Amandi plant in Ghana which was closed by Brandon Bowen and his team in the London office. This was the second major power plant closing in Western Africa in two years where Fieldstone played a key role.                               
  • Fieldstone Africa has engaged Dr. Raymond Zoukpo and Professor Achi Atsain as Senior Advisors in Abidjan and Ambassador Christopher Dell as Senior Advisor in Maputo. These gentlemen have worked with some of the most important institutions in Africa at the highest ranks (the African Development Bank, the UN Mission in Democratic Republic of Congo and the US State Department in several countries in Southern Africa, respectively). We look forward to an unmatched network that can assist our clients and the gravitas that these esteemed individuals bring.
  • Diogo Mariath will be joining our London office this week. He brings with him a wealth of experience in renewable project development and financing in Africa and beyond. As a Brazilian, Diogo adds to our Lusophone credentials.                                            

Finally, Fieldstone Africa has taken steps to build out our presence in Francophone Africa. Along with the aforementioned Senior Advisors based there, Taslimy Gassama begins work as a Director in Dakar, Senegal, where Fieldstone Africa will open an office in the coming weeks.  Taslimy has over 15 years of Investment Banking experience in the region and will be active in large capital projects - raising capital, leading acquisitions and divestitures, offering strategic guidance and structuring project financings. The region has become open to broader international participation in recent years.

As is evidenced by all of these news items, Fieldstone Africa’s long-term commitment to an “Africa of regions” is backed by resources and a vision of unlocking the potential of the continent and all of its people.

We look forward to playing an active role by assisting you in formulating and executing your plans.

Best Regards
Jason Harlan
Chief Executive Officer
Fieldstone Africa