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AFRICAN HUB COUNTRIES Q&A


Investing in the region’s renewable energy potential


Christopher Schulten, general counsel of Aeolus Kenya, spoke to the IFLR1000 about some of the trends affecting foreign investment in East Africa's energy sector


How long have you been working in the energy sector in Sub-Saha- ran Africa? About three years, so far focused on wind energy but branching out in the last six months or so into other clean energy opportunities.


What has been your experience of the Sub-Saharan Africa renew- ables sector and what developments have you seen in the past three years? I’ve seen two things. One is that private investors have gotten bolder in the last few years, so there is a branching out beyond the traditional World Bank-style or DFI-style project finance. You’re seeing private equity on the equity side, and you’re seeing traditional banks on the debt side – and these are private banks, not with government of international backing – who are willing to invest in infrastructure projects and in Kenya without a government guarantee. So there is an appetite in the private sector for the type of commercial risk one finds in Africa.


The other thing I am seeing is that the regulators are maturing, learning


and becoming more versed in renewables. Wind energy, in particular, is an entire sector that didn’t exist a few years ago. They were practically starting from scratch. For example, when Aeolus Kenya started develop- ment on the Kinangop Wind Park, Kenya did not have the regulatory in- frastructure necessary to support a wind industry. Today it does. It has been a joint learning process between the developers and the government regulators as they put in place the proper feed-in tariff structure, for in- stance, and also on the technical side, as they prepare the grid to take in- termittent sources of energy, which up until now they do not have. So that has been a whole learning curve on the regulatory as well as on the technical side.


From a foreign investor’s perspective, how has the regulatory side matured? In addition to the feed-in tariff structure and the building up of technical expertise within the regulators that I just mentioned, the most important regulatory change I think has been in the direction of making it easier for international investors to invest in the country by breaking down eco- nomic barriers that make it difficult for them to enter the market and repatriate their investments. The laws are embracing globalisation.


What are the main issues that arise in trying to secure the bankabil- ity of projects? Wind is a new industry in Kenya, so not surprisingly all the players are new to the market and, in many instances, new to each other so you don’t have, as you do in Europe, very set contracts and very set risk allocations. These teams haven’t been negotiating with each other on project after proj-


52 ENERGY & INFRASTRUCTURE | SUB SAHARAN AFRICA 2013 “


It’s the risk that the thing will not come off and the risk of being left holding the bag in a place you are unfamiliar with


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