At the recent Invest in African Energy (IAE) forum, a project-focused panel discussion underscored the importance of strategic planning and execution in the energy sector across Africa.
The panel, comprising industry experts and leaders, delved into the complexities of transitioning from the Final Investment Decision (FID) stage to project startup, emphasizing the need for a balanced approach between traditional fossil fuels and next-generation energy solutions.
In the midst of evolving investor interests, the panelists highlighted the critical role of fiscal incentives and cost-effective extraction methods in accelerating Africa’s energy development. They emphasized the importance of reducing the carbon footprint of energy projects to align with global sustainability goals.
Dr. Carole Nakhle, CEO of Crystol Energy and President of Access for Women in Energy, stressed the significance of considering both production costs and carbon intensity during the energy transition period.
Moreover, Reginald Max, Senior Advisor, Infrastructure and Public-Private Partnerships in Lending Operations, Trade and Development Bank said, “We are still battling with energy access, hence the need to categorize the shade of green of the energy transition. It’s a spectrum. As a bank with a strong African footprint, my perspective is energy access.”
To boost the attractiveness of energy projects in Africa, the African Export-Import Bank (Afreximbank) introduced a project preparation facility. This initiative aims to increase the availability of bankable projects by providing technical and financial support from conceptualization to execution.
With a cap of $2 million per project, the facility is designed to cover a wide range of project needs, including capacity building, pre-feasibility studies, and advisory and legal fees.
Helen Aigbe Brume, Director of Project and Asset-Based Finance for Afreximbank, explained the flexibility of the fund, noting its potential to support project developers through various stages of project development. She also highlighted the collaborative nature of the facility, which has been established in partnership with nine institutions across the continent.
Legal and Regulatory Frameworks for Investment Attraction
The panelists agreed on the pivotal role of the legal and regulatory framework in attracting investment and mitigating risks in Africa’s energy sector. Mr. Zion Adeoye, CEO of Pan-African law and advisory firm CLG, discussed the robustness of the current contractual framework, which includes stabilization clauses to ensure contract enforcement regardless of regime changes.
Mr. Zion Adeoye emphasized the importance of solid institutional oversight to safeguard project development against political uncertainties. He said, “Institutional oversight ensures that the regulatory and legal environment remains stable and predictable. This stability is crucial for investors and project developers, as it reduces the risk of sudden policy changes or regulatory shifts that could derail projects or lead to increased costs.”
Moreover, Institutional oversight promotes fair competition within the energy sector. By ensuring that all players operate under the same rules and regulations, institutions help level the playing field. This fairness is essential for attracting investment and encouraging the development of new projects.
Solid institutional oversight is essential for creating a conducive environment for energy project development in Africa. It provides stability, enforces contracts, mitigates political risks, promotes fair competition, facilitates PPPs, builds capacity, and advocates for the sector. These functions are crucial for attracting investment and ensuring the successful implementation of energy projects, despite the challenges posed by political uncertainties.
The Invest in African Energy forum’s project-focused panel provided valuable insights into the strategies and considerations essential for successful energy project implementation in Africa.
From addressing investor priorities and energy resilience to leveraging financial support and navigating legal frameworks, the discussions underscored the complexity and potential of Africa’s energy sector. As the continent continues to navigate the energy transition, these strategies will be crucial in driving sustainable growth and development.
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