RES4Africa and BonelliErede recently discussed project finance, mitigation tools and more in an online meeting focused on Ethiopia and its renewable perspectives.
BonelliErede, an international law firm, together with the RES4Africa Foundation, an organization dedicated to promoting renewable energy in Africa, addressed the management of bankability issues regarding renewable energy projects in Ethiopia with government counterparts.
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The conversation covered important points, including the key factors of project finance, potential risks and mitigation tools. Participants spoke at length about the potential of renewable energy to tackle climate change and Ethiopia’s lack of energy security, in addition to the government’s willingness to embrace the transition from biomass to more sustainable alternatives.
Duncan Keil, Managing Partner of Africa FX led the discussion which involved Riccardo Bicciato, Partner at BonelliErede, and Matteo Cavadini, Head of Business Development in East and West Africa – Enel Green Power.
Riccardo Bicciato touched on several points in his presentation, including:
- How the cost of capital remains a crucial element in every renewable energy investment decision and can significantly influence a project’s business case
- Describing the various risks associated with the pre-construction and construction / operation phases, such as legal and regulatory frameworks, land permits with the former and environmental, political and financial risks with the latter
- The best approach to mitigate these risks, the basic approach being to share the burden between the parties who are best placed to manage them effectively.
- Why not allocating risks correctly can have serious consequences ranging from deterioration of the terms and conditions of the financing, increase in overall expenses, delay or outright cancellation of the project
Matteo Cavadini, followed by an overview on:
- Macro-country factors that impact on the bankability of projects, such as a stable political environment, well-defined energy policies, a sound financial structure, and clear legal and regulatory frameworks
- Appropriate bidding processes for projects, such as allowing only reputable bidders to be involved without any stowaways or speculative bidders, no material changes to the bidding process before or after the bid date attribution, tight deadlines and sound governance of the entire process
- The need for Ethiopia to have a comprehensive renewable energy plan and roadmap to meet targets, in addition to more independent bodies that can support government in procurement procedures
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The future of Ethiopia’s renewable energy
The closing speech was delivered by Antonio Passero, Sub-Saharan Program Manager at the RES4Africa Foundation, who stressed the importance of private sector work with the Ethiopian government to make renewable energy projects a reality in the country. .
During the webinar, Riccardo Bicciato said: “Ethiopia has embarked on a bold journey by announcing its Climate Resilient Green Economy (CRGE) strategy, with the goal of making the nation a climate resilient green economy here. 2025.
“The significant opportunity for renewable energies to be a key pillar of this plan is clear, but the project funding issues associated with such projects pose a threat to their viability. At BonelliErede, we remain committed to advising clients on how to overcome these barriers through practical mitigation measures. We firmly believe that together with private lenders and major energy players, we can help Ethiopia make the most of its natural resources and ensure the energy security of its people for years to come.
“Ethiopia has enormous potential in terms of photovoltaic, hydroelectric, geothermal and wind power.” commented Roberto Vigotti, Secretary General of the RES4Africa Foundation “Exploiting the renewable resources of this country is the strategy to pursue and guarantee its sustainable development. The public and private sectors play a crucial role in this process and the promotion of this type of synergies is at the heart of the work that RES4africa carries out with its partners.