Fieldstone Newsletter - Third Quarter 2017

Dear Clients and Friends of Fieldstone (Africa) 

At the outset, you might note the slight alteration in my salutation from previous newsletters.  From now on, this publication will also cover Fieldstone’s activities in markets beyond Africa. We have built up our presence in Latin America this year as our clients have asked us to accompany them there with our knowledge of renewable projects, emerging markets and auction systems. We have also been engaged in projects in some of the most developed energy markets in the world (more on that in the next newsletter). 

The step is not new in itself: Fieldstone Africa professionals have previously transacted in markets all over the world and Fieldstone itself has been a global presence in energy and infrastructure for 27 years with more than US$50-billion in transactions on five continents. 

But this is only the first step. We intend to cover the increasingly interconnected energy and infrastructure sector in all key money centres and selected dynamic markets as one integrated organisation.

As an example of this extension, we have recently founded Fieldstone Development Capital Incorporated (Fieldstone DC), a United States subsidiary based in Washington, DC, which will interface with the Overseas Private Investment Corporation, the United States Trade and Development Agency and other key institutions in the city.

In this regard, our newly appointed Senior Advisor Ambassador Christopher Dell and long-time Senior Representative Barney Rush will be important resources. The corporate structure and staffing will qualify Fieldstone DC for US development funding, helping our clients to access grant monies to foster projects in the development stage.

In Latin America, Fieldstone has entered into engagements related to renewable and thermal-generation energy projects. Bruno Bueno, Fieldstone’s Latin American Senior Representative in Lima and Buenos Aires, is supported by a team drawn from across Fieldstone and coordinated by Managing Director Zahed Sibda.

The opportunity in Latin America is to apply our experience in developing thermal generation (generation facilities in Ghana and Nigeria over the past two years and a final-stage project in South Africa at present) and in utility-scale renewable programmes (most notably through the groundbreaking Renewable Energy Independent Power Producer Procurement Programme in South Africa). 

In the African energy sector, much of the action seems to be in small-scale projects. Fieldstone has traditionally advised on these efforts when we can see a way to expedite them and engage economically.  FIRST, the platform to provide financing to small-scale renewable on and off-grid solutions in South Africa, reached financial close at the end of September.  FIRST was backed by KfW, the German development finance institution and Rand Merchant Bank, with 1.3 Billion Rand of total financing.  Fieldstone acted as advisors on the original establishment and procurement of this transaction. The programme is a step towards pushing forward smaller-scale renewable energy projects in South Africa.

FAIR (Fieldstone Africa Investment Resources) also handles smaller projects brought to us by clients that require an additional push- i.e. efforts beyond Fieldstone’s financial advisory toolkit. The lack of progress on utility-scale developments is one of the reasons that we have held off on our FARI (Fieldstone Africa Renewable Index) publication for the time being, until we can see what is real and what is simply announced.

Off-grid initiatives remain both promising (the opportunity to connect more than 600-million people in sub-Saharan Africa who do not have access to electricity) and elusive (how does one make a sustainable enterprise and hold down costs?). Fieldstone has advised on more than half a dozen of these initiatives. We believe that through incremental progress and recognition of fundamental requirements, the day will come when the mix of private initiative with assertive public-sector support will ultimately get it right.

All of the above suggests that the vital search for creative ways forward in Africa is ongoing. The traditional financing of large projects – while playing an important element in Africa’s progress – will not nearly provide all the answers and does not even address all the questions.

Governments and donors making hard commitments will have to tackle the infrastructure needs to back aggressive private-public partnership models, allowing for return on capital over time. The amount of private capital interested in and committed to investing in the continent’s infrastructure is astounding and must be tapped, but there is still a bottleneck when it comes to opportunity to invest in bankable programmes.

On the energy side, technological developments are altering the way we think about generation and the way generation is transmitted. On a continent where the cost of grid extension is a major limiting factor, the distributed model of smaller generation may address needs on a region-by-region or even more localised basis.

In this time of greater transition, every developer and institution working in the sector requires independent expert advice more than ever.  Fieldstone accepts the challenge to think broadly and creatively about structure and strategies to make projects financeable and make things happen.

Best Regards

Jason Harlan
Chief Executive Officer
Fieldstone and Fieldstone Africa