The Executive Director of the Africa Centre for Energy Policy (ACEP), Benjamin Boakye, has called for a diversified funding approach, including the use of pension funds to finance energy sector projects.
He noted that despite ongoing government negotiations with Independent Power Producers (IPPs) over unpaid debts, the cost of electricity remains high due to systemic inefficiencies and challenges with power purchase agreements.
Speaking at an energy conference, Mr. Boakye explained that cheaper and sustainable electricity can be achieved through innovative financing models such as a mix of public-private partnerships and alternative funding sources, particularly pension funds channeled through infrastructure bonds.
“The proposal that we had on the table was for us to clean up that space, to make sure that utilities can act right and be able to generate the needed revenues to cater for the value chain, so that we stop the accumulation of debt in the sector. If you don’t do that, then you are not incentivizing other business people to also invest. You are not incentivizing the capital market to do the investments that are required,” he stressed.
Mr. Boakye also highlighted the importance of addressing the cost of capital, which is influenced by risk factors in the energy sector, noting “We still really need to look at the cost of financing in our continent to see how we bring it down. The suggestion has been for us to do a blended financing that clearly optimizes and shares the risk for investors to have tailored projects that they can actually put their money into,” he said.
According to him, affordable electricity is key to poverty reduction and inclusive growth. “There is opportunity for growth. There is opportunity to elevate our people out of poverty by giving them energy. But that energy has to be affordable. And the way to deal with that is to make sure that there is transparency around contracting and also capitalizing on emerging technologies such as solar to extend electricity to the poor,” he added.
He further clarified that blended financing could be achieved by pooling resources from different sources, explaining that “There are various schemes. We have multilaterals. We have local banks. We have pension funds. The idea is to channel these into infrastructure bonds that can support the sector while minimizing risks for investors.”
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