Risk Allocation and Strong Structuring Vital for Bankable Clean Energy Projects

Speaking on the topic, “From Idea to Investment: Making Clean Energy Projects Bankable in Africa’s High-Risk Markets” during a panel discussion, Mr. Tetteh said developers need to focus on three core principles when preparing projects for financing. “Think about project viability, financial structuring, and risk allocation and mitigation. These are fundamental considerations if you want to make any clean energy project bankable,” he explained.

He noted that project risks can be analyzed across four main factors; project-specific risks, macroeconomic factors, political risks, and natural disasters. Within each area, he stressed that, developers must clearly assess the type of risk, determine who is best placed to manage it, and establish how it will be mitigated.

Highlighting project-specific risks, Mr. Tetteh explained that the development stage often carries the highest risk for sponsors. “This is the period when feasibility studies, technical assessments, permits, licensing, and land acquisition are undertaken, usually requiring significant financial outlay long before any returns can be realized. Sponsors can spend $5 million developing a project, and in some cases, it takes three to seven years before completion,” he said. “The risk here is that the project may never materialize, and this risk sits squarely with the sponsor because commercial banks typically do not finance projects at this early stage.”

Mr. Tetteh further noted that the construction stage introduces a different set of risks, including delays, cost overruns, completion failures, and performance issues. At this stage, Executive Vice President highlighted that the choice of an Engineering, Procurement, and Construction (EPC) contractor becomes critical.

“You want an EPC contractor with a solid track record and the capacity to deliver within the agreed timeframe. Any delay in construction can trigger penalties because power purchase agreements and repayment schedules with financiers are often tied to completion timelines,” he advised.

Mr. Tetteh stressed the importance of risk-sharing arrangements between sponsors, EPC contractors, financiers, and sometimes even governments, depending on the risk category. “Investors want clarity on who bears what risk and how each risk will be mitigated. The more clearly this is defined, the more bankable the project becomes,” he noted.

He concluded by urging developers to undertake rigorous due diligence at every stage of the project cycle.

Picture: Sydney Nii Ayitey Tetteh, Executive Vice President for Energy and Infrastructure - Stanbic Bank Ghana.