The African Trade Insurance Agency (ATI) through its partnership with KfW, has launched a new renewable energy solution, the Transparency Tool on the sidelines of the premier global energy event for Africa, the African Energy Forum (AEF) in Lisbon, Portugal.
The Transparency Tool is an on-line platform that works in tandem with another innovation created by the duo, the Regional Liquidity Support Facility (RLSF). Both solutions support Independent Power Producers (IPPs), one of the important providers of energy, who are key to unlocking the renewable energy potential in Africa.
IPPs are an important link to increasing electrification in Africa because they can implement small-scale green projects that generate more affordable energy with less social and environmental impact.
As a result, governments and national utilities in developing countries are increasingly relying on IPPs for power generation.
Despite the demand, IPPs still face steep hurdles, particularly the lack of access to reliable financial information on the national utilities, which are often the agencies that purchase their power.
This gap in financial information, along with ambiguities in the utilities’ payment record hinders investments to the sector from new investors, project developers and lenders.
More importantly for the IPPs, it also increases the perceived risk of non-payment by IPPs and their lenders, thus increasing the cost of financing.
The Transparency Tool provides an innovative solution to these challenges. It is an online platform that will record the effective payment behavior of African utilities and periodically, make the records
public. Over time, the objective is to align the perceived risk with the real liquidity risk that could help energy sector stakeholders better assess the credit worthiness of off-takers.
Specifically, the Transparency 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 the RLSF.
The roll out of The Transparency Tool is linked to signed Memorandums of Understanding (MoUs) that make RLSF, alongside The Transparency Tool, available to countries, which currently include Benin, Burundi, Madagascar, Malawi, Uganda and Zambia. Ethiopia and Ghana are likely to follow in the coming months.
The Transparency Tool is designed to work in tandem with the RLSF, an initiative that insures small-scale renewable projects against the liquidity risk of non-payment by an off-taker.
The Transparency Tool and the RLSF, are joint initiatives of ATI and KfW, with funding from the German Federal Ministry
for Economic Cooperation and Development (BMZ).
According to the Regional Underwriter, Tusekile Kibonde: “ATI Energy access is key to Africa’s continued growth. This is primarily why we have chosen to focus on
growing the energy sector in Africa by increasing available insurance capacity.
“Thanks to our partners at KfW and EIB, ATI is developing a strong reputation for its underwriting capacity in the energy sector across Africa, ” he said.
