The Cost of High Financing
Victoria Otieno, Managing Director of Alpha Commercial Bank, talks to AOP about the unique challenges of funding energy projects in South Sudan.
What are the unique challenges to financing energy ventures here?
Financing is based on risk analysis. The poor understanding of the political risk in South Sudan poses challenges. The Government has made every effort to ensure any police risks can be considerably mitigated. However, funding may be expensive due to this issue.
Is that perception wrong, in your opinion?
Yes, and no. I think that before one takes a view on South Sudan, you have to understand the political climate and how it has played out in the past and may play out in the future. Once you understand that, you are then able to make informed decisions. From my point of view, you can invest in South Sudan.
How does Alpha support the development of the oil and gas industry?
We have played and continue to play a role in bringing Nilepet, the state oil company, together with suitable funding partners. When our balance sheet is not able to meet their needs, we go out and find another funding partner that is able to meet some of their requirements.
From a downstream perspective, we support the companies that supply Nilepet with petroleum products, since Nilepet is the official marketer of fuel in South Sudan. Apart from that, we have a big portfolio of downstream players, including the retail stations that sell the finished goods on behalf of Nilepet. We’ve done a lot in partnering with Nilepet to ensure that fuel is available on the market at all times for the general citizenry.
What are you looking for in international funding partners?
If you look at the requirements of the oil and gas sector, especially upstream, the projects that we would look at require millions – or billions – of dollars in financing. For those, we look at private equity firms and other private funds that are interested in a project, and we approach them for lending. For larger upstream projects we look for private equity partners. We have been in talks with private equity firms in the Middle East recently, for example. With these partners, we take whatever our balance sheet can accommodate, and the rest we would syndicate.
Where do you recommend investors should start when they are looking at entering South Sudan?
The South Sudan Investment Authority has been set up and its primary responsibility is to house all of your investment requirements under one roof and shorten the time required to set up on the ground. Also, the government itself – through various offices at the ministries and depending on the area where you want to invest – has a very open-door, pro-business policy. They will be ready to support anyone who shows an interest. From a banking perspective, because of our previous history and current relationship with the government, we host a large number of investors coming into the country who are seeking our expertise on country risk, on business risk, and on environmental risk. We are always available to provide that advice and walk them through the process. As Alpha Commercial Bank, our doors are open. As a local bank we understand the local environment.
This interview is part of the Africa Energy Series: South Sudan 2017 book, which was released at Africa Oil & Power in Cape Town. Read the full report here.