ALER participates in the 2nd REWG meeting organized by ASAER
The second meeting of the Renewable Energy Working Group (RWWG) was held on March 14th, with the co-organization of AFD – French Development Agency and ASAER - Angolan Association of Renewable Energy.
The session, which took place in person and virtually, had the participation of ALER, namely the Project Manager, Rita Marouço and the Executive Director, Isabel Cancela de Abreu.
Representatives from the Ministry of Energy and Water, the Ministry of Finance, the British Embassy, the European Union Delegation in Angola, the UNDP, the World Bank, JICA, IRSEA and ASAER were also present.
The meeting's agenda had as topics for discussion the Legal and Regulatory Framework for the Energy and Renewable Energies Sector, whose presentations were made by Dr. Marino Bules, Dr. José Luivuango and Dr. Walter António, representing the IRSEA and the Ministry of Finance, respectively.
During the debate the following points were discussed:
• Regarding the objectives for the Renewable Energy, were established targets for improving the functionalities of the structures: (i) increase in the current rate of electrification, (ii) increase in energy generation capacity to 150% in the order of 7,500 MW, of which 500 MW are from New and Renewable Energies, (iii) private participation in the electricity sector; (iv) intention to launch an ambitious program for renewable energies with the following initiatives: a) focus on solar energy, b) solar hybridization of thermal and hydroelectric plants, c) biomass and solid waste thermal plants, d) launch of the first wind farms in Angola, and d) studies and relaunch of the mini-hydro program.
• In the legal framework, there are only a few references to renewable energies, in the General Electricity Law, which grants economic advantages to those who use renewable sources, and in the Regulations for Production, Transport, Distribution, and Commercialization of Energy Electricity, which contains a special part of renewable energies, on the Production Linked in Special Regime, which is subject to special legal regimes, such as electricity production through renewable resources. The Regulation for Renewable Linked Production is in the process of being drafted, which will also indicate the procedures for awarding the concession of linked renewable production, by proposal and public tender. It was also discussed the issue of remuneration for linked renewable production, which will initially be based, within a contractual period, on maximum full tariffs, tariffs that are not subsidized. In the field of exchange rate issues, it is foreseen that, through the concession contract of the renewable linked production plant, the following rights will be granted: (i) Licensing with the National Bank of Angola for access to foreign exchange and (ii) Compensation mechanisms in case of exchange variation.
• In the field of the legal regime, the OGE law sets the maximum annual limit of Guarantees to be granted by the State. This granting of State Guarantees depends on the authorization of the holder of the Ministry of Finance, and it has the amount in Kwanzas of up to USD 10,000,000. For amounts above this value, the authority belongs to the Executive power holder. The total amount of Guarantees, to be granted by the State to all projects is up to USD 250,000,000. The possibility of accessing external guarantees was also discussed with international institutions.
• Turning to exchange rate issues, given the fact that Angola has a very variable exchange rate, it was thought to create some solutions to cover the risks of financial losses for renewable energy producers, namely: Advance payments, Forward Contract, Choice invoicing currency, and Tariff adjustments. In terms of incentives, in light of the Private Investment Law, Renewable Energy projects may obtain tax and financial benefits, as well as facilities for obtaining licenses and expeditious access to some public services. The approval and publication of the Tax Incentives Code, which will have a chapter dedicated to the granting of incentives to renewable energy projects, is also expected.
• In terms of risks and obstacles to foreign investment in the renewable energy sector, the ones that have made it most unfeasible have been identified and that must be taken care of. In terms of risks, we have (i) default on payment, (ii) difficulties in transferring funds to the country of origin and (iii) replacement of the liquidity buffer. As for the obstacles, we list (i) the lack of guarantee from the Angolan State, (ii) irrevocable letter of credit in USD/EUR in favour of the concessionaire and (iii) Guarantees of payment by public funds in foreign currency.
• In terms of risks and obstacles to foreign investment in the renewable energy sector, the ones that have made it most unfeasible have been identified and that must be taken care of. In terms of risks, we have (i) default on payment, (ii) difficulties in transferring funds to the country of origin and (iii) replacement of the liquidity buffer. As for the obstacles, we list (i) the lack of guarantee from the Angolan State, (ii) irrevocable letter of credit in USD/EUR in favour of the concessionaire and (iii) Guarantees of payment by public funds in foreign currency.
• As for the Renewable Linked Production Regulation, which is still in the process of being created, at this moment there is no draft of the regulation. This will be a supplementary regulation to the Regulation of the Activities of Production, Transport, Distribution, Commercialization of Electric Energy, which will detail the conditions of exercise of Renewable Linked Production, will regulate the guiding principles of the RE development goals, the terms for the tender procedure of granting concessions and the principles and remuneration formulas for Renewable Linked Production.
Finally, it was announced that will be presented a case study at the next GTER meeting – the Quilemba Solar Project by Total Eren/Greentech / Sonangol, this meeting is scheduled to take place on May 5th.