Q&A AFRICAN HUB COUNTRIES “


ect for years. We are really starting from scratch and everyone is a little nervous, a little skittish, when it comes to taking on various project related risk. For example, wind turbines are enormous yet delicate pieces of ma- chinery. The first time large numbers of them are brought into a country’s port and onto its roads you have to get customs clearance, transportation permitting, physically moving from port to site – nobody has done this before, and nobody wants to simply shoulder the risk if things go wrong, as they would in a market where years ago they had developed a system for dealing with these challenges. As a result, everyone sees that there is an opportunity to re-write the contractual map compared to what has be- come standard in Europe, so in contrast to what has become a very settled experience for many industry players, the negotiation of key project doc- uments here is much more freewheeling. Everyone is making it up for the first time and everyone has the freedom to ask for positions that they have given up long ago in European contracts, and to put off risk that they would normally accept. Deciding what positions are bankable and not bankable, in these circumstances, is tricky as a result – especially for project finance players who are used to a very settled universe of risk.


now because it is and we’re seeing the fruits of that in the renewable sector. I think that the counties will become laboratories for new business laws and new regulatory structures that will really benefit all the country.


Have you seen an improvement in the land laws? There is still uncertainty and it is the uncertainty that makes people nerv- ous. The law is coming into the globalised age, it just needs to get there and people need to get comfortable to make it reliable.


How has the financial environment in Europe and in the US impacted projects in Sub-Saharan Africa? In my experience it really doesn’t have much of an impact. We are dealing with a lot of African private financial institutions and Africa is growing, and there is a lot of capital in the world that is chasing returns and in chas- ing those returns they are going to Africa. They are putting their money in African banks, African private equity and African investment vehicles. In a way, you could say Africa almost benefits from the fact that there aren’t these returns in Europe, but there is a lot of pooled capital looking for something to invest in and Africa is increasingly becoming that some- thing.


Deciding what positions are bankable and not bankable, in these circumstances, is tricky as a result – especially for project finance players


What are the biggest risks in looking at a project? From a developer’s perspective the biggest risk is that it doesn’t come to- gether and that the whole thing was a waste of time and development cap- ital. That fear sort of trickles down to everybody involved. 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. Say an EPC contractor is coming in, this will be their first big energy project in the country. They don’t have a bal- ance sheet of other projects, like they do in Europe, so that if this one thing fails there are a 120 things that are succeeding, so it’s a real eggs-in- one-basket scenario as the renewables market takes off. In a few years it will be a whole different story but we are in early days so you see that kind of nervousness.


Are there legal developments you would ideally like to see? Throughout the region there are restrictions on the use of land that date back to the independence period and it would facilitate private infrastruc- ture development a great deal if land transactions were freed up. The re- gion is moving in the right direction on this – it will just take time to get market participants comfortable with the new reality.


What is your evaluation of Kenya’s new constitution? It is absolutely the right direction. The new constitution devolved a great deal of power from the centre to the counties, which will have much more power to set policies and set an economic agenda. Prior to this innovation they didn’t have the power to set an independent policy and raise an in- dependent budget and do the things that, say, an American state can do, but now they have the power and it will be exciting to see it develop. I bet that what you’ll also see, like in the US, is competition among the var- ious counties, as some of them use their new freedom and new authority to become more business friendly, attract investment and do this inde- pendently of the centre; not that the centre is not business oriented right


You mentioned growth in private investment, is that home grown in Africa or foreign? It’s both. What I’m seeing is African institutions. The money is raised in- ternationally and from Africa also, from local sources, but it is African banks and African-based private equity firms. So it’s not just big western banks helicoptering in, it’s really a ground up process. And it’s also not government driven, it’s not DFIs or World Bank or government-to-gov- ernment exchange, nothing to do with the aid budget. It’s the good old- fashioned free market.


Looking at the legal side of things, what’s the best approach to take when trying to arrange external legal counsel and what are the main challenges you face? What we have been extremely fortunate in – and I guess then it would be a challenge if you didn’t find these things – is a firm of international scope that has got some vision and that sees its frontier markets practice as a real opportunity to get in on the ground floor.


One thing we’ve seen with our external counsel that has benefitted us


immensely is that they have deep experience in the UK and throughout Europe in doing the kind of contracts we need done: power purchase agreements (PPA), EPC contracts, O&M contracts... and they have brought that expertise now to Africa and not just benefitting us but ben- efitting the local regulators. I talked earlier about how the regulators are maturing and learning and now coming into their own in their ability to manage and regulate a wind industry… one would need a law firm that has the gravitas to be right there and help them along the way and bring a seriousness to the negotiating table, so that it then has an impact on the way the country structures its industry.


You also really need a one-stop-shop and that’s often a challenge. The


challenge is finding a one-stop-shop where you can get help across your universe of contracts that is affordable, and that will continue to be a chal- lenge. It’s just the nature of contracting legal work.


Are these qualities in a law firm of particular importance in Africa, compared to the US for example? I think the thing that is more important is having the one-stop-shop. In the US it would be much easier to have one firm do your corporate gov- ernance stuff and another do your debt documents and another one do your construction documents, but in Africa, at least right now in the birth of the wind industry for instance, it is critical to have one central brain controlling the entire project and understanding all the nuances and where they link up, because they are not just standard documents. At the end of the day every single document is a bespoke document that is tailored to this new market and if any one of them was out of kilter or if one group


ENERGY & INFRASTRUCTURE | SUB SAHARAN AFRICA 2013 53


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