In respect of grid, Africa is no different to many parts of the world. There is often ageing, inadequate or non-existent grid infrastructure and this can impact the design and structure of a project. Some countries, such as Sierra Leone, have development programmes in place and it is recognised that increasing the funding available for grid infrastructure is required in order to achieve the integration of renewable energy and access to electricity. One issue which is frequently encountered is who takes the risks of delays when the government/ offtaker is responsible for upgrading or completing of the connection works or substation for the plant. It is very difficult to pass this risk on to a contractor as they have no control over the actions of the government/offtaker.
In some projects, contractors have stipulated that if testing and commissioning is delayed beyond a certain time period they look for this to be treated as ‘deemed’ taking over even if the power purchase agreement (PPA) does not give the same level of protection to the project developer. Many sponsors and lenders prefer that the required interconnection works, including new lines and sub-stations, are undertaken by the project company rather than the government/offtaker. This is possible in some countries across Africa, often when the government/offtaker does not have adequate resources to commit to the interconnection works programme and capex required.
In this scenario, these works may be included in the scope of the contractor’s work or as part of a separate contract with a specialised contractor. One issue we have encountered is whether such infrastructure when complete will be transferred to/adopted by the government/offtaker or will remain the property of the IPP. This varies country to country. The ability of the government/offtaker to pay for such infrastructure – by way of a capital contribution or an adjustment to the tariff – is a key issue.