AES

Project Risks in Africa

It is sometimes said that there is a lack of investment capital into projects in Africa because investors do not feel secure. This may be due a lack of local knowledge by investors or lack of legal clarity regarding project ownership. Investors mention host country risks related to sovereignty, regulations and ownership of projects. It is important that investors understand different aspects of ownership within a project for example site rights and rights relating a project’s outputs and benefits. Benefits may include the carbon credits. Investors state they need to be made to feel more confident - for instance in China a CDM regulation law has been passed that clearly states project ownership including of carbon credits and this gives investors comfort. Where legal and regulatory structures for CDM do exist, there may be the problem that investors are unaware of them so the laws need to be communicated.

Project ownership must be clear. AES will strive to contribute to clarity in project ownership in contractual agreements on the projects it works on and also within the wider national regulatory framework.