African Energy Projects: Sovereign Guarantee Or No Sovereign Guarantee? A Choice With A Long-Lasting Impact By Gadi Taj Ndahumba
It is well known that energy projects in Africa are often hard to finance and that to reassure potential lenders, their legal structure will require more security instruments than in developed countries. To address this requirement, independent power producers (IPP) will commonly seek the issuance of a sovereign guarantee by the host government. However, the question as to whether a government should accept to guarantee the offtaker’s obligations is not to be taken lightly, especially in the time of increasing African government debt burdens.