Gov­ern­ments and the pri­vate sec­tor need to know what they’re get­ting into, says the trans­ac­tion leader for fund man­agers AIIM

The Africa Report - - CONTENTS - Ro­main Py Investment di­rec­tor for trans­ac­tions, African In­fra­struc­ture Investment Man­agers (AIIM)

Ro­main Py, Investment di­rec­tor, African In­fra­struc­ture Investment Man­agers (AIIM)

TAR: De­vel­op­ers in Africa – who can take an in­fra­struc­ture project from con­cept to fi­nan­cial close and through the build stage – are in short sup­ply. How much of a drag is that on deal flow? RO­MAIN PY: You do need de­vel­op­ers when you de­velop a pathfinder project into a coun­try. On the other hand, if it is a cut-and­paste af­fair, if you have an es­tab­lished model and you can just roll it over, then you don’t need one nec­es­sar­ily. So, for ex­am­ple, it’s easy to repli­cate the same model in a sim­ple tech­nol­ogy like so­lar, and so you can par­tially re­move the role of a devel­oper. In some es­tab­lished mar­kets like Côte d’ivoire, they have a dif­fer­ent mas­ter-plan­ning ap­proach: in­stead of devel­op­ing plenty of new projects, they de­cided to phase ca­pac­ity. So Az­ito power has had an­other ex­ten­sion phase, on a slightly dif­fer­ent site [and] didn’t need a devel­oper on that site. So you need to un­der­stand in your coun­try where you stand in terms of frame­work, what’s the num­ber of ref­er­ence in­de­pen­dent power plants [IPPS] you have built, and also what is the in­sti­tu­tional ca­pac­ity of the govern­ment to put proper mas­ter plans to­gether. But of­ten in African coun­tries, the pub­lic sec­tor is not there, so you will rely on the pri­vate sec­tor, i.e. the devel­oper, to do this plan­ning. So, for ex­am­ple, in Ghana for the Cen­power project, the govern­ment ca­pac­ity was not there, so you needed a very strong devel­oper to lead the project to fi­nan­cial close. We are cur­rently clos­ing on a 90MW plant in Mali called Al­ba­tross En­ergy. It’s the first IPP in the coun­try so, as with Azura in Nige­ria, you need a very strong devel­oper be­cause it’s the first time you are go­ing through the con­trac­tual ar­range­ments with the govern­ment.

We like to get lo­cal de­vel­op­ers who know the risks and are strong on the tech­ni­cal side

What was the think­ing be­hind your choice of devel­oper in Ghana? We are a bit dif­fer­ent. We like to get lo­cal de­vel­op­ers. We think the most im­por­tant thing in Africa is help­ing build the lo­cal skills base. The per­fect com­bi­na­tion for us is a lo­cal devel­oper who un­der­stands very well the en­vi­ron­ment and knows the lo­cal risks. Some­one who is very strong on the tech­ni­cal side. And then we can bring in the fi­nan­cial muscle, the struc­tur­ing ca­pa­bil­i­ties.

What are African coun­tries get­ting right when it comes to get­ting power projects through smoothly? Firstly, it’s im­por­tant that they are well ad­vised – that they are hum­ble. So no egos and lis­ten to what peo­ple are telling you, es­pe­cially if they have done it plenty of times be­fore. And then you need lead­er­ship. From the top, they need to re­alise it’s an im­por­tant as­set for the coun­try. Every­one in the govern­ment needs to move to­gether in one di­rec­tion be­cause you will need the min­is­ter of finance, the min­is­ter of en­ergy, the min­istry of wa­ter, the min­is­ter of land. So if you get lit­tle wars be­tween dif­fer­ent min­istries or dif­fer­ent parts of the govern­ment, that slows down the devel­op­ment of the project. A flat hi­er­ar­chy works best. And it is not a con­struc­tion con­tract. It’s not a two- or three­year deal. It is a wed­ding. You are get­ting mar­ried. The govern­ment clearly needs to un­der­stand the obli­ga­tion they are get­ting into. The pri­vate sec­tor needs to clearly un­der­stand what they are propos­ing, and what are the penal­ties if they don’t de­liver so you don’t get into a prob­lem like with Turkana [a wind power project in Kenya], where you have the tur­bines built but the trans­mis­sion isn’t.

Is there still a lot liq­uid­ity out there look­ing to de­ploy in African in­fra­struc­ture? Yes. Eq­uity is not an is­sue, es­pe­cially on the power side. In­ter­view by Ni­cholas Nor­brook

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