Finding the right credit enhancement’s package to support the obligations of a state-utility offtaker (the “Offtaker”) in state-utility Independent Power Projects (“IPPs”) in selected African markets is fundamental for the bankability of those IPPs.

In some markets, the credit rating is below the investment grade, foreign direct investment is hard to flow and the credit worthiness of state utilities is poor.

Sovereign risks play an important role in predicting the number of IPPs for each country as well as the size of investment (debt and equity) commitments.

The risk of non-payment by the sovereign supporting the  Offtaker’s obligations under the project documents in some IPPs is not insubstantial. A large percentage of the African countries are considered risky borrowers by international standards.

Multilateral Development Banks (“MDBs”) play an important role by offering risk mitigation tools to unlock financing in African countries such as credit support instruments.