AFRICA EUROPE FORUM

Herbert Smith Freehills was a proud supporter of the Africa Europe Forum which was held virtually on 17 – 18 May 2021.

Thomas Kessler, a partner in the firm’s Frankfurt office, joined a panel discussion on the “Role of Renewable Energy in Sub-Saharan Africa’s Power Supply” together with Mario Ledic, Director Governmental Affairs, ANDRITZ HYDRO GmbH, Ravensburg; Dr. Daniel Schroth, Acting Director Renewable Energies, African Development Bank, Abidjan; Peter Schrum, Chairman, Sunfarming GmbH, Alensys AG, Erkner; Barton Shasha, Business Development Manager Afrika, ib Vogt GmbH, Berlin; and moderator Karsten Fuelster, Managing Director, Polaris Consulting & Invest GmbH, Frankfurt.

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ROLE OF ENERGY STORAGE SYSTEMS IN AFRICA’S GREEN ENERGY BOOM

Authors: Christophe Lefort and Mathias Dantin

The following article was first published in the May 2021 edition of The Lawyer – The In-House Issue

According to the International Renewable Energy Agency, renewable energy capacity in Africa could reach 310GW by 2030, which would make Africa the world’s top producer of green energy. If this prediction comes true, it would be the result of a strongly proactive political approach that was already visible in 2015, when member states of the West African Monetary and Economic Union (also known under the French acronym UEMOA) set a goal to produce 82 per cent of their energy from renewable sources by 2030.

The rapid increase in energy production capacity (whether from renewables or other energy sources) is exacerbating existing power grid concerns, such as network congestion, inability to extract the totality of the power produced by independent power producers (IPPs) for buyers using grids, and lack of noticeable improvement during peak consumption periods. The intermittent nature of renewables adds a further challenge.

Energy storage is key for integrating renewables onto the grid – however, there is currently no applicable regulatory framework

With the backing of the World Bank and in coordination with the concerned governmental authorities, the West African Power Pool is looking into launching calls for tender for the development of large-scale regional solar parks with storage capacity in Burkina Faso and Mali to help to smooth the flow of solar energy and redirect some of the power produced during the day to evening peak hours.

This approach of combining renewable energy production with storage can be used immediately by private operators in any country that allows private power generation, since producers can both inject and withdraw power from the grid. However, the regulatory or contractual framework must address the need to encourage producers to use the power plant’s storage system (especially during periods of peak demand) so that they are better able to meet energy demand from the market. In particular, energy storage has a pivotal role to play in the deployment of mini-grids by enabling supply and demand optimisation on a small scale, in parallel with the development of self-sufficient energy solutions (including, for example, residential solar PV systems).

Energy storage can also play a key part in grid management (reduction in voltage and frequency deviations, capacity mechanisms to safeguard the security of electricity supply during peak periods, management of surplus energy production, etc, thereby reducing the need for costly grid infrastructure investment), usually via services agreements entered into with the local transport system operator.

The involvement of private sector actors, notably via services agreements, could help to address some of the challenges that we have identified in the development of energy storage capacity in sub-Saharan Africa.

In most jurisdictions, there is no clearly defined regulatory framework governing the role of energy storage operators, including the related taxes/fees for use of the grid. The existing rules relate to energy production and trigger the application of public procurement regulations (i.e. PPPs and concessions).

Investment costs (and related financial fees) form the largest component of expenditure in the implementation of energy storage, particularly when compared to the low operating costs. The scale of the installations, the duration of the services agreements and the level of services required will therefore have an impact on investment costs and on the level of attractiveness for private investors.

In addition, as for other types of infrastructure investment in sub-Saharan Africa, relevant private sector actors are sensitive to key risks such as the non-payment risk from national companies, political risk, currency risk and security risk.

As a result, there is an urgent need to define a new contractual and regulatory framework which brings together private sector energy storage developers and operators with other industry players in order to optimise power grid usage and efficiency.

For this purpose, we can flag that the International Finance Corporation is working to finalise a roadmap for integrating independent energy storage systems in Burkina Faso.


We are keen to speak with you about how we can help you achieve your strategic goals in the African renewable energy space. For more information, please contact the lawyers below or your usual Herbert Smith Freehills contact:

Christophe Lefort
Christophe Lefort
Partner, Paris
+33 1 53 57 74 00
Mathias Dantin
Mathias Dantin
Partner, Paris
+33 1 53 57 65 48

AFRICA EUROPE FORUM – Global Virtual Conference 17 – 18 May 2021

Herbert Smith Freehills is a proud supporter of the Africa Europe Forum. Thomas Kessler, a partner in the firm’s Frankfurt office, will join a panel discussion on the “Role of Renewable Energy in Sub-Saharan Africa’s Power Supply”. Nina Bowyer, a partner in our Paris office and global co-Head of the firm’s Africa Practice Group will join a panel discussion on “The Next Big Thing between Germany and Africa – Hydrogen ?”.

 

 

Register (free of charge) 


For more information, please contact Rebecca Donovan or your usual Herbert Smith Freehills contact:

Rebecca Donovan
Rebecca Donovan
Business Development & Central Management Executive, Paris
+33 1 53 57 70 90

AN INTERVIEW WITH HERBERT SMITH FREEHILLS LLP DISCUSSING M&A IN AFRICA

Lexology GTDT Market Intelligence provides a unique perspective on evolving legal and regulatory landscapes. This interview is taken from the M&A volume featuring discussion and analysis of legal developments, keynote deals as well as an insight into typical transactions within key jurisdictions worldwide.

1. What trends are you seeing in overall activity levels for mergers and acquisitions in your jurisdiction during the past year or so?

Gavin Davies and Rudolph du Plessis: The medium and long-term impact of covid-19, and the effect of lockdown restrictions, on the economies of countries in Africa will probably dominate any discussion about business and M&A activity on the continent for a while. The pandemic has caused a lot of uncertainty, not only about the consequences of the lockdown restrictions on the economy, but also the possibility of a second wave of infections and countries’ ability to cope with infections. At the time of writing, the data seems to suggest a slowdown of covid-19 cases in Africa, but uncertainty remains about the social and economic effects of the pandemic. The uncertainty has definitely had a short-term impact on M&A activity and many transactions were delayed, renegotiated or cancelled. We do, however, expect the crisis to operate as a catalyst for change and, as a result, there will be opportunities for those with capital to invest or a desire to expand. However, we think that M&A will be different. One immediate example of such change will be that the due diligence exercise will have to have an increased focus on certain key areas such as supply chain risk (including force majeure and the possibility of further waves of the pandemic). It will also be important to understand what steps the business has taken in response to the pandemic, (eg, payment of rent) and what activities the target may have undertaken (or carried out differently) during the covid-19 pandemic that could give rise to liability.

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AFRICA RENEWABLE ENERGY: ENERGY TRANSITION AND THE AFRICAN RENEWABLES MARKET

For our clients looking to invest in the “green” energy sector, the African renewables market is occupying a growing space in strategic thinking. Projected GDP expansion and rapid population growth will drive up energy demand in Africa, which combined with the presence of rich renewable resources (including wind, solar, geothermal and hydropower) means that African renewables is seen as a clear growth market.

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RESPONSIBLE INVESTMENT BROCHURE

Authors: Nila Wilde, Martin Kavanagh, Rebecca Major and Joanne Elson

For Africa-focused developers and sponsors in the renewable energy market, ESG is likely in the forefront of your minds and it is important to show knowledge of what is expected in the responsible investing market in order to ensure swift project development and to enhance bankability. This handy guide profiles the key factors relating to ESG which may impact your business. We hope that this guide provides you with a better understanding of the ESG expectations in the responsible investment market. We are keen to speak with you about your approach to ESG and how we can help you achieve your strategic goals in the Africa renewable energy space.

You can download the English/French version of the brochure below.

ENGLISH VERSION

FRENCH VERSION


For more information, please contact any of the lawyers below or your usual Herbert Smith Freehills contact:

Stephane Brabant
Stephane Brabant
Partner, Paris
+33 1 53 57 78 32
Antony Crockett
Antony Crockett
Of Counsel, Hong Kong
+852 210 14111
Oliver Elgie
Oliver Elgie
Senior Associate, London
+44 20 7466 6446
Joanne Elson
Joanne Elson
Senior Associate, London
+44 20 7466 2802
Martin Kavanagh
Martin Kavanagh
Partner, London
+44 20 7466 2062
Rebecca Major
Rebecca Major
Partner, Paris
+33 1 53 57 78 31
Elsa Savourey
Elsa Savourey
Avocat, Paris
+33 1 53 57 76 79

Nila Wilde
Nila Wilde
Avocat, Paris
+33 1 53 57 65 50

AFRICA RENEWABLE ENERGY – ‘BANKABILITY’: A CHECKLIST FOR MARKET ENTRANTS AND SMALLER DEVELOPERS

Authors: Martin Kavanagh, Joanne Elson, Josh Attard and Beatrice McGuire

For Africa-focussed developers and sponsors in the ‘green’ energy market, enabling financing and ensuring that the contracts that they enter into are ‘bankable’ is of fundamental importance.

Following on from the release of our guide to the alternative funding options available to support renewable energy projects in Africa, we have produced a handy checklist which sets out the key considerations you should bear in mind when negotiating and entering into various project contracts, to help ensure that the impact of risk allocation on the overall “bankability” of your project is coherent and balanced.

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HERBERT SMITH FREEHILLS ATTENDS AFRICA ENERGY FORUM IN LISBON

Author: Joanne Elson 

The 21st Africa Energy Forum (AEF) took place on the 11th to 14th June 2019 in Lisbon, Portugal. The annual AEF is the largest Africa energy gathering of the year and easily draws over a 1000 delegates from all over the globe, including many government officials, public private sector representatives, developers, dealmakers, investors and business leaders, each with their focus on energy in Africa. This year renewable power together with new technologies in the battery storage and off-grid sectors were inescapable in their prominence. However, hydro, conventional power, LNG and oil & gas remain of key strategic importance in a number of jurisdictions.

Africa as an emerging market presents an opportunity to investors of all kinds and, in particular, development finance institutions with investment capital. These opportunities were discussed in great detail in highly focused sessions and break away meetings over the four day conference. Both public and private partnership investment opportunities were promoted in order to mobilise inward investment into the region. The delegates found the conference to be insightful and important given the ever prominent issue of power on the continent. Another key focus was on the ever increasing debt of governments either by way of direct guarantee liabilities or contingent liabilities with respect to their State utilities’ obligations.

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