At a CIF Partnership Forum event hosted by the African Development Bank on November 7, 2012 in Istanbul, a panel of speakers considered key points underpinning private sector investment in CIF operations, including fiscal ones, and lessons from specific countries which have been successful at attracting private sector investment at least in some sectors.
The session was moderated by Mafalda Duarte, AfDB Chief Climate Change Specialist, and featured Andrea Bacher, Policy Manager for the International Chamber of Commerce (ICC), Kaushik Ray, Senior Associate with Trinity International LLP, Tim Irwin from the Fiscal Affairs Department of the International Monetary Fund, Karen Breytenbach, Senior Project Advisor in the Public Private Partnership ("PPP") Unit of the National Treasury of South Africa and Head of the Finance Desk, Nintira Abhisinha, Vice-President for Finance, Accounting and Finance at Bangchak Petroleum Public Company Limited, and Caleb Indiatsi, Manager, Corporate Planning, Strategy and Project Execution, Geothermal Development Corporation Kenya.
From the global perspective, panelists identified a need for risk-sharing mechanisms, and noted that political risk can serve as a main barrier to long-term financing, that "joined-up thinking" among government agencies and ministries is key to successful projects, and that it is important to ensure early identification of fiscal risks.
The country sessions focused on three countries' actions: South Africa's use of a rolling program available through procurement to pursue the country's large renewable energy program as well as the key role of the country's PPP unit with adequate skills; Thailand's plans to expand its energy mix to include a greater share of renewables including innovative solutions such as rooftop solar and biofuels; and Kenya's use of concessional sources of funding blended with multilateral development bank (MDB) financing - in this case of AfDB and Scaling-up Renewable Energy Program for low-income countries (SREP) funding - to fund resource exploration, which is expected to pave the way to private sector investment in resource development in the Menengai geothermal project.
Session conclusions were:
It is necessary to establish clear government targets and approaches to private sector investment, that feature buy-in from all necessary government ministries, thereby mitigating the risk of any future policy or project changes.
Ensure the provision of appropriate funding for the entire project cycle, from development to financial close.
Explore the fiscal risks - ensure that public obligations can be met and the capacity to pay exists.
The AfDB has been involved with the CIF since its inception in 2008. Today, the Bank is actively supporting African nations and regions as they develop CIF investment plans and then channeling CIF funds, as well as its own co-financing, to turn those plans into action.