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Energy

Breathing new life into power utilities through debt restructuring tools

Teuta Kaçaniku's picture


Photo: Raymond Ward | Flickr Creative Commons

Sector reform is a familiar concept for anyone working in the energy sector, particularly in developing countries. Typically, reforms involve measures such as building an institutional framework that allows for an independent regulator, improving the operational efficiency of utilities (for example, by unbundling vertically-integrated utilities), creating an environment for private sector participation, and last but not least, introducing tariffs that reflect costs. All these measures are designed with one goal in mind: to put the sector on a sustainable path and improve the quality of service for end-users.

While acknowledging the many benefits that sector reforms can bring, one issue we continue to face is the poor financial state of key power utilities. In other words, a lack of creditworthiness. Often, their lack of financial creditworthiness is the most critical obstacle to implementing investment programs. This makes utilities even more dependent on continuous government subsidies.

Strategies that work: New South Wales leads infrastructure development in Australia

Mar Beltran's picture


Photo: Dylan's World / Flickr Creative Commons

A decade before the financial crisis, Australia was a bastion of infrastructure successes. The country’s four major airports (Melbourne, Perth, Brisbane and Sydney) were privatized. Numerous greenfield projects were also launched, for example, extensive highway construction, and new projects were continually added to the pipeline.
 
Some of these new projects, however, faced significant difficulties: some were constructed without robust performance data, leading to overambitious forecasting and overaggressive financial structures. In part, this led Australia to suffer multiple high-profile defaults and brought the country’s infrastructure project pipeline to a halt.
 
But, today, Australia is displaying signs of promise once again. And one state, in particular, is among the developed world’s GDP growth outliers: New South Wales (NSW). The state’s economic growth has reached 3.5%, outstripping the country’s average rate of 2.8%, and even the G20 average (which stands at 3%). As such, NSW’s infrastructure model has likely had a multiplier effect on economic activity—and has been identified as a potential playbook for other jurisdictions.

Infrastructure & Africa’s development—the PPP imperative

Fida Rana's picture


Photo: CIFOR | Flickr Creative Commons 

Africa is a continent rich in natural resources and boasts a large young, ambitious, and entrepreneurial-minded population. Harnessed properly, these endowments and advantages could usher in a period of sustained economic growth and increased well-being for all Africans.
 
However, a lack of modern infrastructure is a major challenge to Africa’s economic development and constitutes a significant impediment to the achievement of the Sustainable Development Goals.
 
According to a recent report by the World Bank, there are varying trends in Africa’s infrastructure performance across key sectors and regions. In telecommunications, Sub-Saharan Africa has seen a dramatic improvement in the quantity and quality of infrastructure, and the gains are broad-based. Access to safe water has also risen, with 77% of the population having access to water in 2015, from 51% in 1990. In the power sector, by contrast, the region’s electricity-generating capacity has changed little in more than 20 years. At about 0.04 megawatts per 1,000 people, capacity is less than one-third of that of South Asia, and less than one-tenth of that of Latin America and the Caribbean.

Guarantees light the way for clean energy through renewable auctions

Arnaud Braud's picture


Photo: Scaling Solar project in Zambia

What is a common thread between Argentina, Maldives, and Zambia? In each of these countries, the World Bank provided guarantees to support transparent auctions for renewable energy. Through these, I have seen how the Bank’s involvement helped increase private investors’ confidence, attract world-class developers, and ultimately reduce tariffs.

Drawing on 10 years of diverse experience in the power sector in both public and private organizations, my role is to help bridge the divide between public and private parties and help each side better understand the other. The World Bank is ideally positioned for this. Both sides understand the World Bank carries out a detailed due diligence and ensures the auction meets international standards. Both sides appreciate the World Bank will be an honest broker if issues arise. Because of its long term and continuous involvement in our client countries, the World Bank can help identify and solve issues early on. As such, no World Bank project-based guarantee has ever been called.

A critical piece of the infrastructure puzzle: good governance

Chris Heathcote's picture



A major factor hindering infrastructure implementation and delivery is the absence of good governance, according to the 130 delegates from 27 countries who came together for the first Regional Roundtable on Infrastructure Governance in Cape Town in November.
 
There’s no denying infrastructure is crucial to Africa’s growth prospects. Nor can one ignore the ever-growing need for infrastructure on the continent—in Sub-Saharan Africa, only 35% of the population has access to electricity, and 23% still lack access to safe water and sanitation. Despite an estimated shortfall of nearly $100 billion in infrastructure investment in Africa, lack of financing is not the biggest problem.
 
The landmark Roundtable brought together representatives from African governments, the global private sector, multilateral and international organizations, civil society organizations and other development partners, for a discussion on the challenges and practical solutions to the governance impeding successful infrastructure delivery in Africa.

Building benchmarks for infrastructure investors: a long but worthwhile journey

Sarah Tame's picture


Photo: User 377053 | Pixabay

The Argentinian presidency of the G20 opens this month and will be marked by a focus on infrastructure investment. The G20 and Organisation for Economic Co-operation and Development (OECD) have already announced a widescale data collection initiative to create benchmarks to monitor the risk-adjusted financial performance of private infrastructure debt and equity investments.

It’s about time.

Investors have hit a roadblock when investing in infrastructure. Until now, none of the metrics needed by investors were documented in a robust manner, if at all, for privately held infrastructure equity or debt. This has left investors frustrated and wary. In a 2016 survey of major asset owners by the EDHEC Infrastructure Institute (EDHECinfra) and the Global Infrastructure Hub, more than half declared they did not trust the valuations reported by infrastructure asset managers. How, under such conditions, can the vast increases in long-term investment in infrastructure by institutional players envisaged by the G20 take place?

Farewell 2017; Hello to More and Better Infrastructure in 2018

Jordan Z. Schwartz's picture


Photo: auphoto / Shutterstock.com

As Washington, D.C.’s infrastructure braces for its first winter freeze and 2017 draws to a close, this feels like the right moment for a recap on what the year has brought us in terms of closing the infrastructure gap across emerging markets and developing economies; policy directions within and outside of the World Bank Group; new instruments, tools, and resources; and—the proof in the pudding—actual investment levels.

There may not be one blog that can capture all of those themes in detail, but here is a brief overview of what 2017 has meant and what is on the docket for 2018 and beyond.

Including women in infrastructure: from Washington to Senegal

Julia Prescot's picture


Photo by Adam Gregor/ Shutterstock.com

The theme of this year’s Global Infrastructure Forum was delivering sustainable and inclusive infrastructure. As a woman who works in the world of infrastructure, I was invited to join a panel at the forum made up solely of women to address gender inclusivity and was asked to provide a specific example of a project beneficial to women. The first thing that came to mind was our solar project in Senegal, which has not only opened up the country to solar for the first time, but has also empowered local women through training in business skills through an organization called Empow’Her that was linked to the project.

More than a technicality: The engineering foundation of Scaling Solar

Alasdair Miller's picture



Public-Private Partnerships (PPPs) require the coordination of an impressive number of stakeholders to mobilize the commercial financing needed to achieve sustainable, inclusive growth in challenging environments. A great deal of analysis, negotiation, and hard work goes into every project. And each one presents an opportunity to encourage investors to venture into countries and compete for projects they wouldn’t have considered before and, ultimately, to create new markets.

While the commercial and legal challenges involved in structuring PPPs are well known, the efforts that go into conducting rigorous technical due diligence are less well known. For example, projects that aim to provide utility scale solar PV on short order, like the World Bank Group’s Scaling Solar program, require a team of experienced engineers from IFC’s Energy and Water Advisory working hand in hand with our PPP transaction advisors, legal experts, and environmental and social specialists to make them a reality.

Global Infrastructure Forum maps out route towards delivering sustainable infrastructure

Amal-Lee Amin's picture



Last Saturday, tens of thousands of people gathered on the Washington D.C. mall for the March for Science alongside hundreds of sister marches around the world to coincide with Earth Day. Climate change and environmental protection were high on the agenda as the planet continues to warm and countries confront an increasing number of extreme weather events.

Meanwhile, down the road at the Inter-American Development Bank (IDB), the 2017 Global Infrastructure Forum was in full swing, discussing how to deliver inclusive and sustainable infrastructure to ensure we achieve the objectives of the Paris Agreement and the Sustainable Development Goals (SDGs).

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