June 21, 2024

AOW 2023: African banks, innovators step in to fill hydrocarbon financing gap left by international lenders

Oredola Adeola

 

A wave of new African banks and other innovators are stepping into the hydrocarbon financing gap created by the exit of international commercial banks and providing the finance required to drive the next phase of Africa’s energy development.

 

This was part of the comments made by speakers during a session on the theme: Investing in African Energy, being part of activities lined up for the Africa Oil Week (AOW) which started on Monday and ended on Thursday in Cape Town, South Africa.

 

 

EnergyDay gathered that the event was dedicated to supporting dealmaking in the African energy sector, on the sideline of the reality that finance in the African upstream was seeing rapid change and innovation.

 

 

Most of the panelists rejected the idea that Africa is a high–risk investment destination, according to them dealmakers consisting of African commercial lenders, commodity traders as well as African multilateral banks, who understand the business dimension of the continent are committed to developing the continent’s resources.

 

 

They emphasised that the dealmakers have a risk appetite and are willing to partner in the development of their continent, are making headways, and committing debt finance to most African upstream assets.

 

 

Pascal Nicodeme, CFO of Africa Oil Corp, in his comment at the session, said, “There is appetite and optimism for African oil and gas projects, and there is liquidity available.

 

 

He said, “The only difference is that the actors have changed. The era of the international banks is over, but the African banks have stepped in. There is still a great appetite for quality projects with the right balance sheet.

 

 

Babajide Sodipo, Senior Manager, Export Development Advisory at Afreximbank on his part emphasised that Africa is open for hydrocarbon business.

 

 

He said, “As a development bank, we continue to support fossil-fuel financing, and we do it in a way that doesn’t endanger the environment, and which gives back to the community.

 

 

Anastacia Deulina CFO Afentra, an independent oil and gas company with interests in Angola, said, “Africa is a great place to do business,”

 

“Most countries on the continent are stable, and even a bit boring. In Angola, we have found a pragmatic, supportive, and efficient environment, and were able to secure finance on one of our projects within six weeks,” Deulina said.

 

Mike Fidler, CFO of Azule Energy, an international energy company based in Angola, his part said, “We need to ensure we invest in the current energy system, without tearing it all down while we invest in the new,”

 

“But there is liquidity available for quality projects with good technical resources, government support, and high ESG standards.”

 

Akinbambo Ibidapo Obe, General Manager, Commercial for Oando in his remark revealed that another solution energy companies are finding is to structure deals themselves, and to then go and sell them to possible partners such as traders or development finance institutions.

 

He said, “We are not seeing banks breaking down our door looking to provide finance. To deal with this challenge, we are transitioning from a customer-seller relationship to more of a partnership approach.”

 

The speakers at AOW, therefore, agreed that for projects to find finance in the realignment, management teams need to clearly outline how they plan to minimize the carbon impacts of their operations and to ensure their developments will also positively enrich host communities.

 

Taiwo Okwor, Vice President of the Africa Finance Corporation, a pan-African development finance institution, stated that ESG commitments are very important today.

 

He said, “We are more than willing to partner, but we first need to understand where you are on ESG, and how we can help.”

 

Energy companies have emphasised that they support the move to decarbonise the sector, and to ensure it maintains high standards in the ESG space.

 

Fidler observed that there is pressure for ESG compliance from lenders, as well as from shareholders.

 

He therefore said, “But ESG compliance is easy when you have the right culture, one that cares about the society where it operates.

 

Another solution emerging in the African energy sector involves independent commodity traders assuming a growing role as owners and financiers of producing oil and gas assets.

 

Matthieu Milandri, Trafigura’s Head of Upstream Finance, a leading commodity trading firm, expressed enthusiasm about the African hydrocarbon market.

 

He said, “The idea of political risk in Africa is exaggerated. Traders are doing good business in Africa. We evaluate the quality of the asset, the management team, and the country’s risk. As long as there is production, we can do business.”