Uganda shares its energy performance success story in power purchase agreements and financial modelling with Malawi and Sierra Leone in five-day programme supported by GEAPP
Enhancing the bankability of the power sector to improve electrification is not something that will happen overnight.
In fact, it can be a slow process with both technical and financial hurdles. Yet a country committed to making positive change will seek out ways to do so.
One country that is rising to meet this challenge is Uganda. The high performance of the country’s electricity industry presents a great opportunity to neighbouring African countries looking to learn from their success. While Malawi and Sierra Leone have made notable improvements in the performance of their respective Electricity Supply Industry’s (ESI), both countries believe improvements can still be made, and their governments understand that to do so requires a specialised level of upskilling and capacity building. This is one of many reasons the Global Energy Alliance for People and Planet (GEAPP) was forged: to bring countries together to share learnings and accelerate scalable solutions.
Both Malawi and Sierra Leone reported a number of challenges within their ESI’s, including availability, reliability, and the quality of their power supplies. Relatively high system losses for their networks and tariff issues have also affected financial sustainability. Additionally, the slow connections of new customers and the overall low efficiency of their individual industries needs further consideration.
The ESI institutions of Malawi and Sierra Leone requested technical assistance in various techno-economic aspects of the power sector. Among the requests was capacity building in Power Purchasing Agreements (PPAs) and financial modelling. Looking to develop and strengthen the skills, processes, and resources required to transform a system from within, GEAPP facilitated a new training programme that took an extensive approach to tackling these concerns.
The sessions, held across five days in January 2023 in Uganda’s Kampala, included inspiring presentations from 13 expert trainers, including Eng. Ziria Waako, CEO of Uganda’s Electricity Regulatory Authority; Arun Velusami, Partner at Hogan Lovells; Martin Erone, Manager Corporate Affairs at UETCL; Ivan Karau, Principal Engineer at ERA; Patrick Mwesige, Project Manager at Energy Utility Corporation Limited; Innocent Naswali, Manager Regulatory Finance at ERA; Michael Mwondha, Principal Economist at ERA; Nicholas Tatrallyay, Berkelley; and Dr. Geoffrey Okoboi, ERA.
Representatives from the governments of Uganda, Malawi, and Sierra Leone participated in a comprehensive and rich training programme designed to provide a 360-degree overview of the various considerations for PPAs. The in-depth sessions offered support and clear instructions on the eventual facilitation and implementation of better financing, management, and understanding of the full processes needed for success. With such support, the energy sectors of both Malawi and Sierra Leone could thrive in the same way Uganda’s has.
“We have heard a lot about the successes of the Uganda electricity sector, but all these are from foreigners; coming from Uganda ESI is refreshing. We doff our hats to them. One area that resonated was the need to build on the benchmarking learning opportunities by zeroing in on specific areas. Hearing about the GEAPP journey in Malawi is exciting. Energy is at the heart of my country’s development agenda. This is the beginning of our concerted efforts to work together with GEAPP to support the capacity needs of these countries to bring about sustainability and bankability in the electricity sectors. GEAPP, you have changed the narratives in the development partners’ space by being very flexible and removing bureaucracy. Let us change energy for good,” says Abu Sesay, head of PPP Unit, Leader of Sierra Leone Delegation.
Uganda’s abundance of expertise made the country a natural destination for hosting the programme. Hands-on knowledge on how to improve the power sector environments within their African neighbours’ countries were presented by practitioners from within Uganda’s Ministry of Energy & Mineral Development (MEMD), the Uganda Electricity Generation Company Limited (UEGCL), and the Uganda Electricity Transmission Company Limited (UETCL), and the Uganda Electricity Regulatory Authority. It should be noted that the Uganda power sector is the best-regulated on the African continent according to the African Development Bank’s 2021 Electricity Regulatory Index.
The sessions had a key aim: to enable Malawi and Sierra Leone to gain a greater understanding of electricity generation pricing and contracting by addressing the common business models of Independent Power Producers (IPP’s). This included aspects on the commercial viability of IPP’s by looking at cost structures, cost recovery, and how costs are modelled in the tariff. Project risks and how these are appropriately allocated in PPAs was also covered.
The specific training sessions included:
- A Strategic Overview and Introduction to PPAs and their role in the Commerciality of Power Generation
- Commercial Aspects of Power Generation
- IPP Under a Project Finance Arrangement
- Electricity Generation Costs and Generation Tariff Determination
- Financial Modelling for Cost Recovery
- Commerciality of PPAs and Contents & Provisions of PPAs
- Cost Reflective Electricity End-User Pricing
As well as training sessions, the programme included dedicated site visits to the Mayuge Solar Plant, the Kakira Bagasse Power plant, and the Bujagali Hydropower plant in order to showcase a selection of Uganda’s PPAs in action.
The Government of Malawi appreciates GEAPP for offering energy sector experts a benchmarking training in power purchase agreement negotiation, due diligence, execution and tariff modelling. The training which took place in Kampala, Uganda, exceeded our expectations and found it practical as we learnt from success stories in context of our setup. Lessons learnt will go a long way in structuring efficient and effective power purchase agreements with independent power producers and execution in Malawi. - Thokozani Malunga, Chief Energy Office and Leader of Malawi Delegation
This is just one example of how GEAPP is working with countries and both public and private sector partners to improve bankability of power sector in order to catalyse investments that can shift to clean energy in a sustainable, jobs-rich, and economically viable way. With models like this in place designed to enable energy access and economic growth, GEAPP will continue to support countries’ efforts to meet critical climate and development goals. The success story of this PPA training programme based on Uganda’s journey and experiences demonstrates it is possible to build a bankable power sector that promotes a more equitable and sustainable future for all; and that together, we can get there.