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African energy utilities workshop held in Johannesburg

Earlier this month, Standard Bank -- one of the leading financiers of power projects in Africa and a member of the ‘Private Investors for Africa’ coalition that promotes investment in Africa – teamed up with the World Bank to organize a unique brainstorming workshop that brought together senior managers from power utilities across Africa.
The goal was to provide a forum for frank discussions on the opportunities and challenges that these senior utility managers face in developing the power sector in Africa -- and how public and private financiers such as the World Bank and Standard Bank can help.

The workshop covered the gamut of management issues surrounding power generation and transmission in Africa – credit ratings, debt capital markets, governance, independent power producers (IPPs), privatization, regulation, risk management, and utility performance – and led to a cross-fertilization of ideas where utility managers were able to see the bankers’ perspective, and vice versa.

The workshop was kicked off by Standard Bank’s Paul Eardley-Taylor, who gave participants an overview of utility trends, both globally and across Africa. His word of caution was “Remember the D’s”: Definitely only doable deals will get done these days!

The World Bank’s Bernard Tenenbaum then outlined ‘what a utility executive needs to know about regulation.’ Noting that “regulation is controversial” regardless of locale, he emphasised that the two key issues in keeping utilities financially healthy are ensuring that tariffs reflect costs and that the costs of buying power from IPPs can be passed through to consumers. But he cautioned that regulators will not respond favourably to a request for a tariff increase unless the utility can demonstrate that it will provide “value for money.” A follow-up panel discussion offered participants a chance to delve into these issues in depth using two specific examples from Nigeria and Uganda.

“The workshop helped me to get a better overall perspective on a range of issues affecting electricity utilities,” said Muyange Yves, Director General of Electrogaz, Rwanda’s national utility. “Such forums are essential for sharing knowledge necessary for improving the management of utilities.”

The workshop tackled the topical issue of the credit crunch, kicking off with a presentation by Fitch credit rating agency on their methodology for assigning ratings to power utilities. Mike Waller of Standard Bank followed up with a discussion on how hedging instruments can help utilities manage foreign exchange and other risks in their operations, while Greg Fyfe presented a case study on the role of export credit agencies in the sector. Standard Bank’s Alastair Campbell rounded things off with a group discussion on the lessons learned to date with IPP projects.

“The workshop was a valuable experience,” said Mozes Zulu, Finance Director of ZESCO, sharing a utilities’ perspective. “We gained deeper insights into the working of financial institutions, and that is always a big plus for utility managers.”

For the World Bank’s Africa Region Energy Group (AFTEG), the workshop was the first event jointly organized with the private sector. In a post-workshop evaluation, participants were enthusiastic, praising the participatory nature of the discussions and rating the event highly on how it would improve their skills once back at home. Given the positive feedback, plans are underway to follow up with future workshops that would provide concrete and detailed guidance on some of the topics covered, such as how to use hedging instruments in practice to reduce risks, or on case studies in promoting grid and off-grid renewable energy projects, among others.

“We were delighted to organize the workshop for our clients in collaboration with a leading private sector financier like Standard Bank,” said Rob Mills, an economist on the World Bank’s Africa Energy team. “The power utilities are key players in achieving energy security in Africa, and the workshop was the ideal place for informal discussions on how both public and private sector financiers can work together to assist the management of these companies.”

Additional information:
News date: 30/11/2009

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