Johannesburg-based law firm Cliffe Dekker hosted the launch of a handbook late last month with the aim of providing energy stakeholders with a holistic overview of Power Purchase Agreements (PPA) in energy deals in Africa.
The idea for the handbook ‘Understanding Power Purchase Agreements in Africa’ came from a brainstorming session in Washington DC attended by power experts from around the world, said US Consul General Christopher Rowan.
Mr Rowan explained: “It became clear that a standardised agreement would not work across multiple jurisdictions and so instead a handbook intended to be a guide to PPAs was compiled.”
The Power Africa initiative partnered with the US Department of Commerce’s Commercial Law Development Programme to bring together a group of international experts including Jay Govender of Cliffe Dekker Hofmeyr and President Obama’s Power Africa coordinator Andrew Herscowitz to draft and publish a PPA handbook to provide a holistic overview of PPAs and the obligations, risks and remedies that are found within them, included in a formal statement.
Power Africa successes
Andrew Herscowitz, coordinator for Power Africa and Trade Africa, explained that a key objective of the Power Africa initiative is to expand electricity access across sub-Saharan Africa where both the public and private sectors are included.
Herscowitz said: “In its first year, Power Africa played a role in helping over 3000 MW of energy projects reach financial close. Some of these projects have been in the pipeline for years and our job is to look at the project and identify obstacles – whether they be a regulatory, technical or a capacity issue, and then work out how these obstacles can be overcome.”
“This PPA handbook, compiled with the aid of top energy experts from various jurisdictions in Africa and the rest of the world, is intended to help all stakeholders to overcome obstacles and move energy deals forward,” Herscowitz continued.
Balance of risk and reward
Mohamed Badissy, Attorney-Advisor at Commercial Law Development Program, U.S. Department of Commerce said: “This sharing of knowledge at brainstorming workshops in the US and Africa allowed us to collect all the various perspectives of global stakeholders and experts and include these in a handbook.”
Jay Govender, the head of projects and infrastructure at Cliffe Dekker Hofmeyr, said that a PPA is a document that is put together with the utmost care and attention “which works as a core against a matrix of other interrelated documents. The foundation of its success is the equitable balance of risk allocation”.
“Risk needs to be housed where it can be best managed. The balance between risk and reward is paramount and the astute stakeholder needs to understand the ultimate consequences of shifting or taking on risk,” said Govender
“There is no hard and fast rule with risk, there are so many different risks and permutations influenced by different variables like the regulatory framework, jurisdiction, and political environment, and these are all discussed in the handbook”, Govender concluded.
The handbook will continue to be revised. For future updates, visit this link.