AFRODAD in collaboration with the Heinrich Boll Foundation and Bread for the World seek the services of competent consultants to undertake 2 separate studies on the Impacts of PPP Financed Energy Infrastructure Projects in Ghana and Kenya respectively. The specific projects of focus are the Ghana Sankofa Gas Project and Kenya’s Kipeto Wind Farm project. The goal of these studies is to critically assess whether energy infrastructure projects financed by public-private partnerships deliver on the promises of their proponents.
Public-private partnerships (often referred to as PPPs) are increasingly promoted as a way to finance development projects. Donor governments and financial institutions, such as the World Bank Group (WBG), have set up multiple donor initiatives to promote changes in national regulatory frameworks to allow for PPPs, as well as provide advice and finance to PPP projects. In 2017, the WBG launched the ‘cascade’ approach, now officially known as Maximising Finance for Development (MFD), which systematizes the WBG’s efforts in support of the expansion of private finance in infrastructure, including in social sectors. According to the ‘cascade’ principles, the WBG “first seeks to mobilise commercial finance” and “only where market solutions are not possible through sector reform and risk mitigation would official and public resources be applied”.
Accordingly, the last decade has seen a huge increase in the amount of money invested in PPPs in the developing world, with a focus on middle income countries and on energy and transportation.
In 2015, world leaders agreed on the Agenda 2030 for Sustainable Development at the United Nations, which includes a commitment on SDG 7: “Ensure access to affordable, reliable, sustainable and modern energy for all”. As of 2018, 789 million people lack electricity. Lack of access to energy may hamper efforts to contain COVID-19 across many parts of the world. Energy services are key to preventing disease and fighting pandemics – from powering healthcare facilities and supplying clean water for essential hygiene, to enabling communications and IT services that connect people while maintaining social distancing.
The Addis Adaba Action Agenda, adopted at the Third International Conference on Financing for Development in 2015, declares: “We will promote both public and private investment in energy infrastructure and clean energy technologies including carbon capture and storage technologies. We will substantially increase the share of renewable energy and double the global rate of energy efficiency and conservation, with the aim of ensuring universal access to affordable, reliable modern and sustainable energy services for all by 2030.”
Definitions, Scope and Timeline
There is not a universally agreed definition of the term ‘public private partnership’. The acronym PPP is currently being used in development discourse to identify very different types of arrangements.
For the purpose of this project, we use the most widely accepted definition of PPPs. Here, they are described as:
- a medium- or long-term contractual arrangement between the state and a private sector company;
- an arrangement in which the private sector participates in the supply of assets and services traditionally provided by government, such as hospitals, schools, prisons, roads, bridges, tunnels, railways, water and sanitation and energy;
- an arrangement involving some form of risk sharing between the public and private sector.
About this Project: This project is an initiative of the Heinrich Boell Foundation-North America, co-sponsored by Brot fuer die Welt. It commences in January 2020 and concludes in May 2021.
The purpose is to expand the understanding of the risks and benefits of PPPs in the energy sector and how they compare to publicly financed energy infrastructure projects. The project shall make available reports that present not only a critique of current approaches to and prospective plans for infrastructure development in energy, but also alternative visions of infrastructure governance and development.
What should the reports include? Each report should:
- clearly define the question(s) it is examining (including the gender-related angle), see suggested questions below;
- describe how dominant institutions are responding to the question(s);
- provide one or more answers to the question(s); and
- acknowledge other sources of knowledge and expertise on the question(s).
Who is the Audience? Activists, journalists, policymakers, and academics.
In January, authors will be selected for short reports on the risks and benefits of PPP-financed energy infrastructure projects. Draft reports will be due by February 15, 2021. Brot fuer die Welt and the Boell Foundation will provide comments by March 15, 2021. Final reports will be due on April 15, 2021
The reports will be copy edited in June 2021, at the latest. The findings of the reports shall be presented at a conference (in-person, hybrid or virtual event, depending on the Covid 19-situation).
Project Selection Criteria
- We aim to collect two (2) analyses of PPP-financed energy infrastructure projects from around the globe.
- These will include two projects from Africa, i.e. Ghana Sankofa Gas Project and Kenya’s Kipeto Wind Farm project
- Included shall be projects from the energy sector (renewable and non-renewable energy sources).
- Selected projects should be financed jointly by an International Financial Institution or a Development Bank or one or several of its intermediaries and the private sector.
The role of PPPs in energy infrastructure projects needs to be seen in the broader context of a changing landscape of development finance over the past two decades. The reports shall provide a critical analysis of the cost-effectiveness, the risks, the development outcomes and the impacts on democratic governance.
Four main issues can be addressed with regard to PPPs in the energy sector:
Cost-effectiveness and risky transfers
When PPPs are used to deliver public services, an important question to consider is who bears the risk of the investment. While there is an assumption that the risk will be transferred to the private sector, this does not always prove to be the case. The state is always the residual risk-holder should the private sector company somehow fail. As such, the fiscal risks of PPPs can undermine the financial sustainability of the whole national budget. For instance, the OECD2 recommends that governments should choose the PPP option only if it delivers better “value for money” than the public option.
PPPs tend to delay budget expenditures. The true cost of PPPs is often unknown as operations are recorded off-balance sheet and they frequently lack transparency due to commercial confidentiality. Non-transparent contingent liabilities are a great risk. PPPs can therefore be the source of debt in countries that are already at high risk of debt distress.
The reports shall assess the sustainable development impacts of PPPs, including affordable access for the poor, the fight against inequality and impacts on the environment. Empirical findings on PPPs suggest that, when efficiency gains are made, they often come at a cost – for example, as a result of lack of investment by the private sector partner to deliver services to an adequate standard, or by lowering costs as a result of flexibilising working conditions and cutting jobs, most of which are held by women. Research indicates that, to make real the potential efficiency gains of PPPs and to translate them into benefits for users, it is key to have an effective regulatory framework that protects the public interest and allows for monitoring and accountability.
2 OECD Principles on Public Governance of Public-Private Partnerships, http://www.oecd.org/gov/budgeting/PPP-Recommendation.Pdf
Further questions can be:
- What does the PPP mean for marginalized groups, including women: Do they benefit?
- Is the PPP targeted towards poverty alleviation, for instance by extending electricity systems to poorer neighborhoods or rural areas?
Impacts on democratic governance
Under the PPP model, the state commissions services, rather than being in charge of direct provision. PPPs can suffer from low transparency and limited public scrutiny, which undermines democratic accountability. Also, the decision-making process (why was the PPP model chosen for a particular project) usually remains in the dark. There is, however, an assumption that the state has the capacity to regulate in the public interest: How does this play out in practice?
Are democratic systems in place to manage the project, which includes project selection criteria and the ability to adequately negotiate, manage and monitor a project throughout its lifespan? Or is there a lack of transparency and procedures that would allow for fair and comprehensive (ex-ante) risk assessments?
Are principles, such as the Voluntary Principles for Debt Transparency3, developed by the IIF Debt Transparency Working Group, being adopted in domestic law on PPPs? These Principles were designed to enhance transparency in private sector lending, particularly to the most vulnerable low-income countries.
Do the PPPs respect the G20 Principles for Quality Infrastructure Investment?
Do the PPPs conform to development banks and country systems in which the projects are being implemented?
How is the information asymmetry between the public and private sector (that favors the latter and undermines state capacity to monitor project implementation) dealt with?
Infrastructure projects are prone to corruption. Which safeguards are in place to deal with the corruption risk and are these safeguards implemented adequately?
How do PPPs impact domestic resources mobilization given the fact that private companies in the projects have obligations to pay their fare share of taxes and conform to tax laws within the jurisdictions of the projects.
Integrating Environmental Considerations in Infrastructure Investments
Which are the positive and negative impacts on ecosystems, biodiversity, climate and the use of resources? Which are the positive and negative impacts on the environment, on human rights and on rights of indigenous people?
Which alternatives exist?
Approach and Methodology
Literature Review and Qualitative and/ quantitative Analysis – Consultant to include their methodology of review and analysis
The consultant will report to the Head of Programs. However, for day-to-day activities the consultant shall work closely with the Policy and Research Consultant of the International Public Finance Portfolio.
The Consultants should have skills and experience in the following areas:
- At least 5 years’ experience in energy financing or policy influence on public private partnerships
- Research/communication skills and experience, with working with civil society
- Quantitative and qualitative data analysis skills
- Lead consultant should have a Masters’ degree or higher in Development Finance, International Development or similar qualification
- Consultant’s understanding of the task and methodology
- Financial Proposal
- At least 3 references for similar work especially in NGO sector
Only shortlisted candidates will be contacted for interviews and comprehensive information on the project.