Key Challenges

Following some challenges experienced in previous solar projects, for example the 100 MW Metahara solar project that was awarded to Enel in October 2017, the Government of Ethiopia has agreed to take a more active role in the procurement process in an effort to streamline the implementation of these projects. Some of the key challenges included:

  • acquisition of land processes;
  • the lack of a “one-stop shop” service for licensing and approvals (meaning that investors in PPPs are required to obtain licences and approvals from different institutions or regulatory bodies, whereas investors outside of PPPs are able to manage this process through a single entity, the Ethiopian Investment Commission);
  • payment guarantees from Ethiopian Electric Power (EEP) for defaults under the PPA;
  • securing competitive financing;
  • converting local currency into USD or any other foreign currency; and
  • a lack of know-how in key government stakeholder departments.

Key Interventions

The following specific interventions by government have been initiated to assist projects with some of these challenges:

  • the government will facilitate the acquisition of land rights on behalf of projects. For example, the land sites for the Scaling Solar projects has been identified and the process for the transfer of land use rights has already begun;
  • the PPP Proclamation provides that restrictions in tenure of land and the bidding system will not apply to PPP projects and that a right may be created for security interests over assets, as required to source financing for PPP projects; and
  • the forex directive, which provides for on-demand access to foreign currency for payment of external debt obligations and suppliers’ credit, will also ease access to finance for investors.

Other incentives that may be available for PPP investors, subject to negotiation and agreement with EEP (and other government departments), include:

  • compensation for change of laws specifically applicable to the infrastructure being developed or the service it provides ;
  • assignability of the project agreements;
  • certain tax incentives;
  • government economic support and guarantee for the sustainability, implementation, and financial viability of the project including the provision of minimum off-take, availability payments, and cash subsidies; and
  • a free choice of dispute resolution mechanism.