Conrad joined Trinity in early 2007 having practiced in Australia with international firm Allens Arthur Robinson in its Energy, Resources and Infrastructure and Corporate teams in Perth and Melbourne where he worked closely with key international and domestic energy and resource companies. He continued his career at Freshfields in London advising on a broad range of cross-border M&A transactions, joint venture and energy projects in a number of emerging markets. Conrad has experience across diverse sectors with a particular focus on project and corporate finance in energy and infrastructure transactions. Having lived and spent considerable time working in Africa, Conrad has added to the experience of the Trinity team in developing projects and advising on transactions across the continent and in other emerging markets.

In other news, we are pleased to say that notwithstanding the ongoing bad global economic news, we continue to see healthy investment in energy and infrastructure projects in emerging markets. As noted in the last edition of Focus, there has particularly been an increased interest in renewable energy projects and we have recently been instructed on a number of these – including wind and solar projects – in Eastern Europe, and continue to be involved in wind power, hydropower, energy-from-waste, sustainable forestry and bioethanol production in jurisdictions including Kenya, Tanzania, Mozambique, Uganda and Mauritius.

In this edition of Focus, we look at the importance of The Treaty on the Organisation of Business Law in Africa in forging a way forward in doing business in Africa. In Legalese, Guy Jolly looks at the recently published UK Bribery Bill which is aimed at providing a comprehensive scheme of offences in relation to bribery both in the UK and abroad.

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Background
Renewable and Clean Energy is flavour of the month the world over. It is impossible to move without another Clean Energy Fund being set up to invest in clean technology or renewable developments. What is driving this frenetic activity in this sector? Is it sustainable or a flash in the pan, and how can the African continent benefit from this “green rush” to develop a meaningful and sustainable renewable and clean energy sector?

The development of the Renewable and Clean Energy sector has largely been as a result of individual Government action or, in the case of the European Union, a positive decision to collaborate to combat climate change and in so doing provide the necessary “sticks and carrots” to provide the structures to drive development forward. Increasingly, international cooperation has spanned new opportunities for those wishing to develop projects in the sector, with the most obvious example being the Clean Development Mechanism (“CDM”) arrangement under the Kyoto Protocol allowing industrialised countries with greenhouse gas commitments to invest in emissions – reducing projects in developing countries.

Climate Change
Climate Change, and the challenges it raises for the world’s future, is the largest single driver behind the development and expansion of renewable and clean energy capacity in the world today. The whole sustainable development ethos is embedded within a key rationale of the CDM regime and the wider Kyoto Protocol. The realisation has dawned that at current levels of human activity, we are living a “three planet” existence, meaning that we are using up the equivalent of the resources of three planets. This is clearly not sustainable in the long term or, indeed, in the short to medium term. Ideally we need to reach the position where we are not depleting the natural resources of the planet at a faster rate than they are being replaced. This is a huge challenge and is where the targeted development of clean and renewable technologies and their deployment in suitable environments is key.

As has been alluded to at the start of this article, there is a place for the development of renewables and clean energy projects within Africa and particularly within the context of the CDM regime. There is much appetite for development of such projects as they not only potentially benefit from the CDM regime by earning the developers Certificates of Emission Reduction (“CERs”) which can be imported back by the industrialised nations to offset against their emissions targets but also provide a solution to many of the problems faced in African countries relating to dependence on imports of increasingly expensive oil, rural electrification issues and transmission and distribution losses. One note of caution does need to be raised at this juncture and that is the worrying statistic which has recently been published which states that there are approximately 2000 current CDM projects which are in the validation and registration queue which is causing some projects in the developing world to be delayed.

A key question which needs to be answered is how African nations can go about obtaining the right projects for their individual needs but at the same time availing themselves of the financial and other assistance available through the CDM regime or the attraction of investments from Clean Energy Funds or multilateral financial institutions. A further key issue facing many African states is the chronic shortage of generation capacity on their systems and how this is squared with the desire to be more sustainable in relation to energy supplies.

Required Policy and Regulatory Frameworks
First, an examination is required of the current frameworks in place in African states for the development of clean and renewable energy projects and how these might affect the increased development of such projects; what barriers may affect any such development; and what is being done to encourage such development. This section will deal in turn with each of these issues and will try to draw some conclusions as to what the future may look like.

Current Frameworks
In a number of African states there are policies in place to encourage the development of renewable and clean energy projects. In South Africa there has been a renewables policy in place since the approval of the White Paper on Renewable Energy in late 2003 and the enactment of the Electricity Regulation Act 2006 (“ERA”). A target of 10,000GWh of power from renewable energy by 2013 was put forward and a number of projects are either underway or currently operational in the hydro, waste gas to energy, solar and wind sectors. One of the key barriers which was recognised in South Africa was the requirement for access to the electricity grid and the ERA has gone some way towards requiring universal access to electricity and the promotion of diverse energy sources. However, it has been recognised that the take up of projects in South Africa has not been as rapid as expected and that the target for 2013 is challenging. The introduction of a Renewable Energy Feed-In Tariff (“REFIT”) is seen as key to encouraging increased development and attracting external finance to the sector in that it will give confidence that a regime is in place which financiers in particular are comfortable with (as the model exists in Germany and Spain to give two examples and is tried and tested and understood).

It is clear that some form of financial or fiscal assistance is very important in relation to project development as well as access to transmission and distribution systems and the opening up of the electricity markets and, where relevant, the unbundling of the ownership of transmission and distribution systems. These issues were dealt with in detail at the recent International Conference on Renewable Energy in Africa held in Dakar and there was a Declaration issued at the conclusion of the Conference which stated inter alia that the African continental target for African governments was to scale up annual renewable energy investments to US$10 billion between 2009-2014 and that there should be a Plan of Action in relation to renewables which should be adopted by African governments with support from international developments partners as well as the private sector.

A follow up to this will be the requirement for appropriate legislation and regulations to be introduced or amended to reflect the intent of the Declaration and to enable the attainment of the targets set.

Barriers Affecting Renewables Development and Steps to Encourage Development

The key barriers to renewables development across Africa appear to be the following three areas- lack of clear policy and regulation; the difficulty in obtaining appropriate financing for renewables projects; and research and technology issues.

Policy and Regulation- this topic has been touched on in relation to the current frameworks which exist in relation to renewables in certain African states. It is clear that certain countries have taken the step of enacting legislation in relation to renewables including South Africa and Morocco. However, there is a need for African states to recognise that the main way to stimulate the development of renewable and clean energy projects is to provide a requirement through legislation to promote renewables. Such legislation could, for instance, include the promotion of rural electrification and renewables in such areas together with appropriate incentives to developers to encourage such developments; the enforcement of such legislation and regulation by independent regulators; and a coherent policy on energy and renewables which is robust and which can be understood by investors in and financiers of renewable and clean energy projects. One way of achieving this is to recognise and work with the international agencies in this area eg UNDP, UNIDO and the World Bank together with the African agencies such as the ADB.

Financing of Renewables in Africa- there is a perceived lack of understanding of the renewables sector by many parts of the finance industry or where there is a degree of understanding then there is a great deal of caution amongst many industry players when considering investments in or funding for renewables projects. Many financiers would cite the lack of robust legislation and regulation governing the sector in many countries as compared with projects which are being developed in, say, the European Union or the USA where there are clear regulatory frameworks in place which give the financiers the comfort they are looking for. On a positive note, there are clearly a number of projects which have either completed and entered into commercial operation in Africa where local and international banks have been confident enough to invest of find such projects. Many have received the assistance of European DFIs who have provided both equity and debt to project in the sector but there again appears to be a gap in the market for the financing of smaller projects although it must be said that developers in the developed world are also struggling to get smaller projects financed. A solution to this may be to engage with the banking sector and to explain what is proposed in individual countries to assist with the development of renewables projects and the regime underpinning assistance to the sector. The DFIs and multilateral agencies could have an important role in assisting countries to encourage investment in and funding of such projects.

Research and Technology- one of the main issues here is the lack of a coherent supra-national plan for renewable energy development and the stimulation of skills learning in the field of renewables on a local basis. There has been historically a lack of institutional support for research into appropriate renewables technology in an Africa-specific context but this is now being tackled through the assistance of organisations such as UNIDO. One of the possible ways of assisting in picking the right technologies for African renewables developments is to assess on a pan-African basis what Africa’s energy requirements are and to assess how best to solve these macro problems through the inclusion of more renewables in the energy mix. Certain technologies are more appropriate for African countries including geothermal and biomass-fuelled projects (particularly in Eastern Africa), biogas and biofuels production. If this assessment if followed through then it is to be hoped that more of the annual estimated US$ 100 billion plus global investment spend on renewables will come to Africa (which currently gets approximately US$ 1 billion).

Steps to Encourage Development
The barriers to development have been well rehearsed in the previous section of this article but what are the individual governments in Africa doing to facilitate development of projects in the Renewable and Clean Energy sector in the light of the issues which have been raised particularly at events such as the Conference on Renewables held in Dakar in April 2008?

It is clear that agencies such as UNIDO are assisting greatly in this area and have put in place a programme for Renewable Energy in developing countries. As a result of this UNIDO has put together a large and technologically broadly-based portfolio of projects in the sector which has included encouraging the development of local capabilities for using renewables technologies in local industrial locations particularly within the CDM regime under the Kyoto Protocol.

Other private sector organisations have become involved in the sector in Africa including the African Biofuels and Renewable Energy Fund which intends to become in the long term a leader in funding Clean Energy development. OPIC has also recently launched a renewable energy fund which could invest in renewable energy projects in Africa.

Countries are now looking carefully at the ways in which the Renewable and Clean Energy sector can be assisted as the countries themselves can see that these developments are vital to ensure a sustainable future, security of supply and a possible solution for the problem of supplies to the rural population. Legislation and regulations are being introduced in the energy sector to enable more development of Renewable and Clean Energy projects and the problems of grid access and market access are both being addressed in a more structured way and on a regional basis as well as on a country by country basis. The number and variety of projects now under construction or being planned in various African countries bears testament to the fact that the removal of perceived and actual barriers to development is taking place as is the increasing interest of external non-African investors and financiers in backing renewables projects.

Conclusion
This article started off on a positive note by emphasising that Renewable and Clean Energy is the sector which is exciting more people than almost any other sector within the energy industry but then travelled through a critique of the problems facing the sector in Africa due to inherent problems of regulatory barriers, financing difficulties and technological issues. However, it is clear from the number of projects in the sector which are being proposed, the Dakar Declaration on Scaling Up Renewables in Africa and the impetus behind the removal of institutional and other barriers to development that Africa means business in this sector and this can only be good news for everyone involved in the sector.

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Authorised
In relation to any business or activity means authorised by licence or treated as granted under section 6 or by exemption granted under section 5 of the Act;

Authority
Gas and Electricity Markets Authority;

BETTA
British Electricity Trading and Transmission Arrangements;

BM Unit
Balancing Mechanism Unit (which can relate either to a generator or a demand customer);

BMA
Bond Market Association;

BSC
Balancing and Settlement Code;

BSC Agent
a person appointed to carry out discrete services under the BSC;

BSC Company
currently Elexon;

Buyers Replacement Costs
for EUETS is the ‘loss’ that Buyers suffer if Sellers fail to deliver;

Calculation Agent
Under B≻

CCL
Climate Change Levy;

CER
Certified Emission Reductions under the Clean Development Mechanism ("CDM") of the Kyoto Protocol;

CHP
Combined heat and power;

Code of Practice or CoP
a code of practice established by the BSC Panel in relation to metering equipment;

Co-firing
the combustion of biomass with coal at predominately coal-fired stations;

Compensation Threshold
the minimum amount where failure under GTMA does not give rise to payment of compensation;

Contract Party
under GTMA where one of the Parties acts for both on ECV;

Covered Transactions
Transactions subject to close out and netting;

CPMA
the Cross-Product Master Agreement prepared by BMA;

CUSC
Connection and Use of System Code – essentially the agreement between all persons using the Electricity Transmission System governing arrangements for connection to and use of this system;

Dark Green Spread
The margin between cost of coal/gas plus CO2 Allowances and sale price of electricity;

Dark Spread
The margin between cost of coal and sale price of electricity eg. 15MW per 5,000 Tonnes of Coal;

Data Collector
an agent appointed by an electricity supplier to retrieve, validate and process metering data from meters;

Distribution Code
the technical set of rules governing connection to and use of the physical Distribution Systems;

Distribution Network Operator or DNO
a licensed operator of a Distribution System;

Distribution System
an electricity network of electric lines below 275kV owned and operated by a licensed Distribution Network Operator;

ECV/Energy Contract Volumes
means, for a Settlement Period and/or Energy Account, a volume of electricity expressed in MW/h;

EEP
Excess Emissions Penalty;

EFET
European Federation of Energy Traders;

Elexon
agency running the Balancing and Settlement Code (BSC); the BSC Agency;

Energy Account
an account held by a party to the BSC for the purpose of accounting in Settlement for quantities of electricity;

EUETS
European Union Emissions Trading Scheme;

FOA
Futures and Options Association;

GB Transmission System
the system consisting (wholly or mainly) of high voltage electric wires owned or operated by transmission licensees within Great Britain;

Generating Unit
any apparatus which produces electricity;

GHG
Greenhouse Gases;

Grid Code
the technical set of rules governing connection to and use of the physical transmission system operated by NGET (formerly NGC);

GSP or Grid Supply Point
A substation where a Distribution System is connected to the Transmission System

GTMA
Grid Trade Master Agreement which is the industry standard agreement under which electricity is traded between generators and suppliers/traders;

IDNO
a licensed Independent Distribution Network Operator;

IETA
International Emissions Trading Association;

ISDA
International Swaps and Derivatives Association;

kW
kilowatt;

kW/h
kilowatt-hour;

LEC
Levy Exempt Certificate under the CCL;

Licence
a licence granted under s6 Electricity Act 1989 (as amended) – includes generation, transmission, distribution and supply;

MW
megawatt;

MW/h
megawatt hours;

NGET
National Grid Electricity Transmission plc (holder of the Transmission Licence);

Notification Agent
Notification Agent for a Grid Trade;

OFGEM
The Office of Gas and Electricity Markets;

Options Annex
published by FOA as an annex to the GTMA to cover Options;

Outage
an incident causing a Generating Unit to cease export to the Transmission or Distribution System;

Persistent Notification Default
the failure of [generator] and/or [Supplier/Trader] to meet obligations under GTMA such that the payments due exceed the Compensation Threshold;

Registrant
the person who is registered in relation to an electricity meter;

REGO
Renewable Energy Guarantee of Origin (EU based but no current value in the UK);

RO
Renewables Obligation made under the Renewables Obligation Order 2006;

ROC
Renewables Obligation Certificate issued by the Authority and representing one MW of output from a qualifying generating station;

Settlement
the determination and settlement of amounts payable in respect of Trading Charges in accordance with the BSC;

Settlement Disruption Event
means per EUETS – cannot close a Transaction due to system failure;

SO
System Operator (NGET);

Spark Spread
the margin between cost of gas and sale price of electricity;

Trading Charges
charges levied pursuant to the BSC;

Transmission System
the system of Extra High Voltage Electricity Lines owned and operated by NGET pursuant to a Transmission Licence;

VTA Quantity
means in relation to a EUETS Transaction the number of Vintage Trade Allowances that Seller has agreed to deliver to Buyer of the applicable Specified Compliance Period (ie. Phase 1 (3 years) or Phase 11 (5 years)).

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