Getting to “Yes” on Power Projects in Benin

Benin Minister of Finance Komi Koutche, left, and MCC CEO Dana J. Hyde, right, shake hands after signing the $375 million Benin
Benin Minister of Finance Komi Koutche, left, and MCC CEO Dana J. Hyde, right, shake hands after signing the $375 million Benin Power Compact in the presence of Benin President Dr. Thomas Boni Yayi
Steve Ruark

As with any contract negotiation, getting to “yes” can be a challenge. For governments across Africa, negotiating the power purchase agreement (PPA) can be especially tricky, particularly when there are multiple parties, disparate cultures and sometimes decades-long contracts. Landing on terms that make power project deals balanced and bankable is no easy feat. Reaching bankability on power concession agreements and PPAs means taking into account interests of all stakeholders, including the State, the national utility as offtaker and grid operator, private investors and international and local lenders.

Earlier this year, the Government of Benin needed assistance in negotiating several power purchase agreements in parallel to expedite the process and reduce time and transaction costs, and Power Africa was ready to help. Working through Benin’s Minister of Energy, Oil and Mining, Dr. Spero Mensah, Power Africa and our colleagues at the African Legal Support Facility (ALSF) mobilized to help advance the deals where international investors had expressed strong interest.

Minister Mensah also provided each member of the Government’s negotiating team with a copy of Power Africa’s Understanding Power Purchase Agreements handbook, which was developed by the U.S. Department of Commerce’s Commercial Law Development Program in collaboration with international law experts, including the ALSF. The handbook is considered by power sector experts as one of the most vital resources to help drive private investment in power projects in Africa. We released the French version earlier this month on the sidelines of the COP 21 climate conference in Paris.

As part of the negotiating process, the international law firm of Allen & Overy and local law firm Baba Body & Sambaou have been hired to represent the Government of Benin. Mazars has advised on financial matters. Together, they have successfully reached consensus with partners to sign two PPAs -- a 100 MW gas project and a 5 MW solar project -- and they are currently working on a pipeline of solar and thermal projects.

These two Power Africa legal tools -- the African Legal Support Facility and the Understanding Power Purchase Agreements handbook -- have had a real impact in Benin, and augment other Power Africa initiatives in Benin, such as the $375 million power-sector-focused compact between the Government of Benin and the Millennium Challenge Corporation (MCC).

Through support from Power Africa and partners, Benin is positioned to attract private-sector investment and negotiate deals that will not only address the gap in access to power for two-thirds of Benin’s population, but do so in a way that allows the country to control its own energy destiny.

These first projects in Benin could serve as precedents for the country but also in other countries in West Africa/OHADA region.

Last updated: June 07, 2016

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