Katharine Gratwick

An Analysis of Independent Power Projects in Africa: Understanding Development and Investment Outcomes

This study analyses the outcomes of African independent power projects (IPPs). Nearly 40 such projects have taken root to date, concentrated mainly in 8 countries. More balanced outcomes are perceived in North Africa than across sub-Saharan Africa (SSA), for reasons linked to more attractive investment environments, more robust policy frameworks, fewer planning mishaps, abundant low-cost fuel and secure fuel contracts as well as credit enhancements such as sovereign guarantees. With few exceptions, these elements were absent in SSA, where the role of development finance institutions and the strategic management of projects seem more important. Copyright (c) The Authors 2008. Journal compilation (c) 2008 Overseas Development Institute..

Independent power projects in Sub-Saharan Africa : lessons from five key countries

The track record of Sub-Saharan Africa’s power sector is dismal. Two out of three households in Sub-Saharan Africa, close to 600 million people, have no electricity connection. The need for large investments in power generation capacity is obvious, especially in the face of robust economic growth on the continent, which has been the key driver of electricity demand over the last decade. The five case study countries, namely Kenya, Nigeria, South Africa, Tanzania, and Uganda were selected because they present the largest and most diversified experience with independent power projects (IPPs) over the longest time period. The primary objective of this study is to evaluate the experience of IPPs in Sub-Saharan Africa and explore how they may be improved. Lessons from past experiences and a review of best practices from the region and from around the world can greatly help countries attract more and better IPPs. As African countries strive to anchor investments from traditional and nontraditional financiers over the long term, a better understanding of the emerging trends in the financial landscape will help them make informed choices and effectively leverage investments and financial assistance. The report is organized in two parts: part one presents power generation in Sub-Saharan Africa and part two presents five country case studies.

Two of a Kind: Lessons from Tunisian Independent Power Projects

Abstract This paper narrates the experience of Tunisias two independent power projects (IPPs), which were developed as part of the countrys electricity supply industry reforms. Although both plants use gas as their primary energy, the two projects vary in size, fuel supply arrangements, power purchase agreements and the legal frameworks under which they were developed. With Rades II, the countrys first IPP, loans have been indexed to multiple currencies and, to date, charges to the utility remain affordable. This is partly due to the fact that the Tunisian dinar (TND) has been relatively stable since the inception of the contracts—unlike in other emerging economies where currency devaluations have resulted in significant increases in charges. With El Biban, the countrys second IPP, fuel supply problems have interrupted production for extended periods, impacting on overall plant performance and revenue. Although the loss in revenue is threatening the financial viability of the plant, it does not have a significant impact on the off-taker and national utility for the following reason. El Biban represents less than 1 per cent of the countrys installed capacity with no guaranteed availability in terms of its contract with the off-taker. Still the plant is crucial in understanding Tunisias overall experience as well as particularly relevant to other countries throughout Africa, such as Nigeria and Tanzania, which have developed power plants as part of a larger gas infrastructure project.

Moroccan independent power producers – African pioneers

This paper tells the story of Moroccos three independent power projects (IPPs), which were developed between 1994 and 2005. The three projects are very different in nature. Through the first project, the country placed nearly two-thirds of Moroccos electricity production in the hands of private producers, the Jorf Lasfar Energy Company – presently Africas largest IPP. The second project, Compagnie Eolienne de Detroit (CED), brought about further diversification of the electricity production mix by harnessing Moroccos wind energy potential; CED is also a record setter in that it represents the first wind farm in Africa that is entirely privately financed. Energie Electrique de Tahaddart (EET), the third IPP, served to introduce the first combined cycle gas plant to Morocco, which is fuelled from the pipeline that delivers Algerian gas to Spain. Another outstanding feature of EET is that the majority of project financing was sourced from local Moroccan banks. Among the key elements that explain project successes are that the Moroccan dirham has remained relatively stable in a low inflation environment since the inception of the contracts, and, in the case of EET, charges are significantly shielded from foreign currency risks.