Energy investments in de-risking instruments for IPPs and transmission projects

The role of de-risking instruments in securing financial close for Independent Power Producers (IPPs) and Independent Transmission Projects (ITPs) is a key focus at the East Africa Energy Cooperation Summit underway in Arusha, Tanzania. Obbie Banda, Senior Underwriter & RLSF Coordinator at African Trade & Investment Development Insurance (ATIDI), shed light on the significant challenges faced by IPPs and ITPs in Africa and how de-risking instruments can effectively mitigate these risks. IPPs and ITPs in Africa encounter unique risks, including payment uncertainties, regulatory changes, and political instability. These challenges can hinder investment and project bankability, creating a need for mechanisms to mitigate risks and attract more investments to the energy sector. De-risking instruments provided by institutions like ATIDI play a crucial role in ensuring the financial sustainability of energy projects on the continent. By offering guarantees against non-payment and political risks, these instruments provide a safety net for investors, encouraging foreign direct investment (FDI) flows into the African energy market. Financial institutions such as the International Finance Corporation (IFC) and the African Development Bank (AfDB) also play a key role in structuring risk mitigation strategies and frameworks for private sector investment in energy infrastructure. Multilateral institutions bring in-depth market knowledge, credit ratings, and risk-sharing mechanisms that boost investor confidence and enhance project bankability. The collaborative efforts of these financial players create an ecosystem that supports the growth of the energy sector in Africa, paving the way for sustainable development and increased access to reliable and affordable energy sources.