The aef podcast: Developing bankable projects - with Globeleq

The aef podcast: Developing bankable projects - with Globeleq image

In the run up to the Africa Energy Forum we’ve launched the aef podcast series: interviews with energy experts to help you develop & invest in African energy projects.

Here we speak with Fabio Borba, Managing Director of Business Development, UK, from Globeleq:

Fabio Borba:  I've been working on the Africa continent in energy and infrastructure for the past 12 years. Looking back, there were virtually no players from the private sector in the industry. A lot of activity has picked up, especially in the most interesting part of the asset life which is the project structure in development. Right now, there are three different types of players in these markets. There are pure developers. There are financial players, and there are strategic investors. Certainly, Globeleq being a strategic investor has a massive advantage over the others. Having been in different shoes at different points in time, is a pleasure to be working in such a fit for purpose enterprise such as ours.


Damon Thompson:  I know that the developers are the glue that hold these projects together. They lead the way, and they bring all the other constituent parts together like the investors. I know that you've been involved as an investor as well. Are there any key differences between the investor and the developer, or are they pretty similar in terms of their goals and ambitions?


Fabio:  The developers play a very key, important part in the project, especially in the early stage part of the development cycle where you're looking at inception and origination stage, looking at what makes sense. Obviously, as an investor you look at the product that is being structured, being put together by the developer. Then taking it from there to investment, into construction, and then later operations.


Damon:  I guess at the end of the day, you got to develop projects which are bankable, as you were saying earlier. I'm quite keen to find out a little bit more about Globeleq now. I know that my first contact with the business was seven years ago. You've moved on tremendously since then, with quite a number of assets. Where are you now? Where are you looking to go in the future?


Fabio:  Globeleq has a great history. We've been around since 2002. We've participated in over seven gigawatts of generation projects, invested over one billion dollars. In its current form, Globeleq is exclusive to the African continent. We currently operate about 1,300 megawatts in eight assets, five countries. Our shareholders are CDC and Norfund. We have a dual mandate from our shareholders. On one hand, we are to give risk adjusted returns for the developed capital employed. On the other hand, we have a developmental mandate where our investment needs to make sense for these countries. It needs to be additional, and really help sustain and develop those countries that host us.


Damon:  You mentioned five countries there. Which are those five countries?


Fabio:  Sure. We're in Tanzania. We're in Kenya. We're in South Africa. We're in Cameroon, and Ivory Coast. The interesting thing about these countries is how different they are. That's one area which is quite exciting in Africa for someone coming in from abroad, who perhaps doesn't realize how vast the continent is.
 

Damon:  I think I'm right in thinking you have an asset in Tanzania. How have you dealt with the problems that Africa can often throw up? How do you deal with that?


Fabio:  Sure. We have an amazing asset in Tanzania. It's one of the great success stories in the continent. Naturally, the different cycles, different governments. The key that holds it all together are our local people. Not only do they extract the maximum in terms of efficiencies out of those machines, but equally they play a massive role in the market. They know the countries very well. They have access to key stakeholders. They continue the dialogue during the operations with those stakeholders to keep explaining, and telling them how our asset is performing, and how is that helping the country.


Damon:  At the end of the day, it's getting megawatts on the grid. There is still millions of Africans who don't have electricity. Globeleq clearly playing quite a key part in that. Looking ahead in terms of technology, what do you think are going to be the key technology trends over the next few years?


Fabio:  A lot has been changing on that front. Initially, we had the large coal, gas, and hydro plants providing baseload through single point, evacuating power through large transmission networks.
 

Now, we've intermittent renewables such as solar and wind playing a larger role. It's quite an interesting development that is happening. The technology's peaking up, and our ability to deploy not only base loads at single points, but also spread out different intermittent technologies in the grid. Now with the energy storage solution picking up, we can increase the penetrations of those technologies into the grid. It's quite exciting times in terms of technology and gives us the ability to do more.

Damon:  You hit the nail on the head with storage. Listening to the rest of the market, it's certainly a major technology. Once the cost comes down, that will be much more widely employed. A bit of an interesting one now. I'm new to the market. I don't know energy at all. I'm looking at going into it for the first time. What would you say to me? What is it you like about it? What is it I would like about the market in Africa?


Fabio: [laughs] The African energy market is a very exciting marketplace. It certainly requires tenacity. It requires creativity and requires one should be interested and excited about learning about the different cultures and the people. It's very much oriented towards people and relationships and not as much about what is being put on the ground. What I would say to someone coming in is, "You should really open your hearts to Africa and look at the opportunities. Look at what is exciting about it and not trying to fit solutions that perhaps work in different places and different regions. Not trying to import that into Africa, because it would be a massive challenge to do and a recipe for failure."


Damon:  What are the key criteria for you choosing an asset? What ducks have to be in line in order for you to go, "OK, this is worth investing in"?


Fabio:  The answer is quite broad. When you're looking at these assets, you have to look at it from many different angles. You have to look at these projects and realize that your project is as strong as the weakest link. You look at the project from a technical perspective. Is this the right technology? Is it in the right place? Are the resources better somewhere else in the country? Are the points of connectivity of these assets in the right place, or do you need to do massive investments to connect that to these locations?

Environmental and social impact is also an aspect which is often overlooked. How is the project going to impact local communities? What impact is it going to have to the environment? Often, we see projects that look interesting on paper fail because they haven't been taking into account the communities, the social and the environmental aspect. Then, legal and regulatory. Is the right regulatory framework in place? Is it ready for private investments in country? Is the government interested? Once you have that project or that technology in country, we can invest in these assets, but ultimately we are in somebody else's home.

[laughter]

Fabio:  Common courtesy indicates that you don't do what you want in somebody else's home.

[laughter]

Fabio:  Your host has a say in this. Really understanding what government and the people need and want in these countries also play a big part in choosing the right assets.

Damon:  Africa has, obviously, an abundance of natural resources and Kenya, where I know you have an asset, in particular in the Rift Valley, with geothermal. Is that an area you're perhaps looking at going down future wise in terms of geothermal applications and technology?

Fabio:  Yes, we do have an interest in geothermal. It's in a very exciting technology. It's baseload. It's one of the few renewable baseloads which has a low impact to the environment if you look at large hydro as being another example with a much more dramatic environmental footprint in comparison to geothermal. The Rift Valley is quite an exciting place with lots of resources. We're quite keen and we're actively pursuing geothermal projects in that region.

Damon:  I know, for example, there's the shale gas in the Karoo in South Africa. That's going to take some time to get out. I know that there's been a slowdown in the gas to power projects in countries like Nigeria and South Africa. Why do you think that is? Do you think it's governments that are holding us back? Do you think it's investment that's holding us back? What is your take on some of these programs that are taking an inordinate amount of time? Gas to power in South Africa - 2015 that launched. We're now in 2019. Hardly anything's moved. Why do you think that is?

Fabio:  Mozambique may take its place.

[laughter]

Damon:  Really?

Fabio:  Mozambique’s Gas Programme is moving ahead. Quite exciting, so we have an asset we're developing there.

Damon:  It's good to know. Maybe we should do a show in Mozambique!

[laughter]

Fabio:  One of the abundant natural resources that some of these countries have, in the continent, is obviously gas. Unlocking the gas reserves, which obviously demands massive amounts of investment, is a challenge for some of these countries. Our view is that this will take time, but it's obvious that investments will be made. Indigenous gas will play a big part in the continent, especially in displacing imported diesel and more polluting forms of thermal electricity.

Damon:  Fabio, you mentioned that Globeleq are exclusive to Africa. How do you see Africa fitting in, in terms of the bigger picture, on the global stage? I know you've had experience in markets like Latin America, but what is your take on that?

Fabio:  Africa represents a massive opportunity. Clearly, there are over 600 million people without power in Africa. Businesses still can't have reliable power, which has a massive detriment to the country's ability to grow. In fact, I read the other day a World Bank Survey that mentions that businesses in sub Saharan Africa typically have about 56 days of power outage per year. Another study I read (from the African Development Bank), mentioned that the cost of those power outages on average is about two percent GDP growth to these countries in sub Saharan Africa. Clearly, there's much more to be done in Africa, as opposed to some of the other regions that I have experienced in the past.

Damon:  How does it compare to some of the regions you've worked in specifically, such as Latin America or Pakistan?

Fabio:  Africa, as a continent, is much more exciting and much more varied. The range of solutions that are available, now with new technologies coming in, makes it much more exciting. Out of all these 600 million people, I mentioned they're not all going to be given electricity through large transmission networks. There are going to be a multitude of different solutions that needs to be put together. Globeleq will have a range of possibilities to be tapped into, a big chunk of that market, which is very exciting.

Damon:  Exciting times ahead, indeed. What is the energy market like, for example, in Pakistan where you worked?

Fabio:  It's totally different. Pakistan, today, they have quite an interesting program with PPAs being pretty much ready and bankable.

Damon:  It's much quicker to develop the project, is it?

Damon:  Indeed, it's much quicker to develop and then to finance. In Africa, there is a huge focus on individuals and relationships. You have to win and be part of that, before you get down to doing business. The trust level needs to be there. Because of so many projects that never go ahead, the stakeholders are much more worried as to who you are and, "Can you really deliver what our country needs?" It takes a little bit time to gain that trust level, irrespective of which business card you have. It comes varied to the individual you're doing business with, and seeing eye to eye, understanding what the stakeholders all need and want out of this. Perhaps, it's like difference between many of the markets that I have been exposed to in Africa and other places like Asia and Latin America, where you can go quicker and that you go directly into business.


Damon:  I totally agree. It's very important to establish that level of trust. Once you've got that, I find that the relationship can continue for years and years and years, no matter where they move onto. Wherever you move on to, you've got that element of trust and you can always speak to each other. That's really very much what the Africa Energy Forum has been about over the last seven years or so - talking. One of the good things about the Forum is that we do bring together and blend that private sector and public sector. It's why we're very much looking forward to having the Forum in Lisbon for the first time this year. We’ve grown from 400, 500 people in Berlin to nearly 3,000 expected in Lisbon. It's been quite a journey. Globeleq have been with us on every step of that journey. I think you've been to every single Forum that I've been involved with. This is coming up to my eighth one. What are you looking to get out of it personally? Then what do you think Globeleq, as a business, are looking to get out of it?

Fabio:  With the Africa Energy Forum, it's a great place to have the whole industry there, in one location, to have that exchange of information.

Damon:  Do you have fun, as well?

[laughter]

Fabio:  Yeah, of course. Lisbon is a great place. I'm looking forward to it.

Damon:  Fabio, you've worked across a very wide range of projects, but tell me, which is the one you're most proud of?

Fabio: [laughs] That's a great question. One which is very close to my heart is the first project that I have successfully developed in Africa, which is the Cabeolica Wind Farm in Cape Verde. This is a project where personally, I led the role of developing it from inception to financial closing. We did that in less than four years which, as you know, from a continent project development perspective, is quite a remarkable feat.

Damon:  How many megawatts was the project?

Fabio:  This was 28 megawatts across four different islands, but it provided 25 percent of the electricity to the country. Cape Verde became one of the country's most successful, in terms of the renewables at that time, and actually up until now. The project is special, also because it was the first wind farm to be developed in sub Saharan Africa, with the exception of the IPP programs in South Africa. At that time, it was very different times. We basically had to beg for technology providers, turbine manufacturers, to come to our project as opposed to now where everyone is in the continent.

Damon:  This is way before Lake Turkana?

Fabio:  This is way before Lake Turkana. In fact, the company who provides turbines to us then later went to Lake Turkana.

Damon:  Fabio, you're in energy now. I'm not sure whether energy was your chosen choice of career necessarily. Was this your first thought when you were growing up to be in this sector, or was there another sector that you were focusing on?

[laughter]

Fabio:  When I grew up, I wanted to be an astronaut.

Damon:  Oh, really?

Fabio: [laughs]

Damon:  Excellent, excellent.

Fabio:  I'm not sure that qualifies me and ended up doing the energy in the developing market. I'm quite passionate about my job. Going through different industries in different regions also has been quite an exciting thing for me to do. In Africa in particular, what makes me most interested and excited is I came to Africa particularly because of the challenges that it posed. It is the region where it's hardest to structure infrastructure assets, which are quite needed for the growth of these countries. The reason I stayed in Africa is the sense of fulfillment. When you actually get something out of the ground, you have a direct feeling that you're actually impacting people positively.

Damon:  Absolutely, spot on. I remember 2016, we invested in a solar project at a township school in South Africa. It was called Solar Turtle. It was solar panels that came out during the day and went back into a container at night. The school were able to completely get rid of kerosene and diesel, and operate a 2,500 people school purely from solar. To see the joy on their faces when we opened it up, and to know they were getting their power entirely from the sun, made it all worthwhile for me. That's why you get up in the morning to go into the office. I'm sure you've experienced similar.

Fabio:  That is exactly it. We see exactly that sense of fulfillment when you put something like this together. Every one of the stakeholders and the people in these countries, they see the difference. It's an excitement for me. That's why I wake up in the morning. [laughs]

Damon:  Excellent. Great.

Transcription by CastingWords