DE-RISKING Africa’s energy INVESTMENTS

De-risking strategies are central to attracting private investors to get transmission projects off the ground in Africa. The foundation of any bankable transmission project lies in its revenue model and off-take arrangements.

Investors must be confident that the entity paying the tariff is creditworthy and has cost-recovery mechanisms in place. In our experience, without this certainty, even the most technically sound projects will not attract financing.

Transparent, competitive tendering processes build market confidence by ensuring all participants compete on a level playing field.

When combined with robust contractual frameworks that clearly allocate risks and provide adequate recourse mechanisms, these elements create the foundation for successful private participation.

Credit enhancement mechanisms, such as sovereign guarantees, backing from development finance institutions, or innovative structures like credit guarantee vehicles, provide the additional security needed for projects to reach financial close.

Regional energy security through cross-border opportunities

Perhaps the most exciting opportunities today lie in regional interconnection projects.

Angola’s excess power could serve energy-hungry mines in the Democratic Republic of the Congo and Zambia – if the transmission infrastructure is adequate.

Cross-border connections like these aren’t just about moving electrons; they’re about unlocking economic potential and strengthening regional energy security.

Key takeaways:

1. De-risking strategies are essential to attract private investment for transmission projects in Africa.

2. Regional interconnection projects can unlock economic potential and strengthen energy security across Africa.

3. Financial institutions can help structure bankable frameworks for transmission development.

The factors driving success are consistency in programme rollout, which builds market confidence; competitive bidding processes, which ensure cost efficiency; and availability-based revenue models, which provide certainty for investors.

Crucially, governments in successful markets took responsibility for high-risk elements, such as land acquisition and permitting, allowing private entities to focus on what they do best – efficient construction and operation.

Standard Bank as a catalyst in this equation

As a leading African financial institution with a presence across the continent, the Standard Bank Group is uniquely positioned to advance such developments. Our role in shaping South Africa’s credit guarantee vehicle, developed in partnership with the World Bank, demonstrates how financial institutions can help structure bankable frameworks for transmission development.

Outside South Africa, we engage with clients across our 21 African markets to identify opportunities and work with governments and utilities to develop frameworks that can attract private investment. This includes everything from supporting local entities seeking to participate in these programmes to facilitating the complex negotiations required for cross-border projects.

The transition to sustainable energy systems requires more than just generation capacity; it demands the infrastructure to move that power where it’s needed most.

Transmission infrastructure represents both a critical gap in Africa’s energy development and a compelling investment opportunity for those willing to take a long-term view.