By Samuel Obbie Banda, African Trade Insurance Agency (ATI)
The payment history of African power utilities has fuelled the perception that these companies are not investor friendly. However, the Transparency Tool, which aims to change investor sentiment by revealing the payment record of utilities, is set to change this dynamic.
A powerful new tool is about to bring transparency to the forefront of the relationships between African power utilities and the Independent Power Producers (IPPs) they rely on to generate electricity. By opening the utilities’ payment records to various stakeholders, and eventually to the public, the stage will be set to promote trust between stakeholders and utilities.
The Transparency Tool will be developed to provide a secure platform for this information exchange to help the continent attract critical investments to the energy sector. Historically, it has been difficult to obtain credible and updated information on how electricity off-takers (mainly public utilities) make payments to IPPs. This predicament has led to a gap in knowledge as most new investors, project developers or lenders, who are considering projects across the continent, have had to make assumptions or rely on the proverbial ‘rumour mill’.
The Transparency Tool is an online platform that records the dynamic payment behaviour of African utilities and periodically makes the records public. Information will be accessible on the platform to all registered IPPs and off-takers and the African Trade Insurance Agency (ATI). Dun and Bradstreet will develop and host the platform.
Linked to ATI’s Regional Liquidity Support Facility (RLSF), a complementary initiative that provides insurance cover for small-scale renewable energy projects against the liquidity risk following non-payment by an off-taker, the Tool aims to achieve three primary objectives:
- To improve the transparency related to payments under Power Purchase Agreements (PPAs) and to demonstrate over time that the off-takers are reliable paymasters;
- to demonstrate to IPPs that the off-taker is paying all IPPs at the same time and thus respects the cash flow waterfall to which it has committed; and
- to enable ATI to monitor the risks it takes through RLSF.
Over time, the hope is to align the perceived risk with the real liquidity risk that could help energy sector stakeholders better assess the creditworthiness of off-takers.
The rollout of the Transparency Tool is linked to signed Memorandums of Understanding (MoU) that make the RLSF, alongside the Tool, available to countries that currently include Benin, Burundi, Madagascar, Malawi, Uganda and Zambia. It is anticipated that Ethiopia and Ghana will follow in the coming months.
The Transparency Tool is being developed alongside the RLSF, a joint initiative of ATI, an African multilateral insurer, and KfW, the German Development Bank. ESI
About the company
African Trade Insurance Agency (ATI) provides political risk and trade credit insurance to companies, investors, and lenders interested in doing business in Africa. With deep roots on the continent, we are positioned to understand, assess, and help mitigate the risks by offering robust solutions. Backed by credibility, financial strength, and underwriting capacity, our commercial partners continue to rely on our assessments.