WEBVTT - The selfish case for supporting foreign aid 0:00:02.720 --> 0:00:10.200 Bloomberg Audio Studios, podcasts, radio news. It is hot outside 0:00:10.760 --> 0:00:14.320 and it's all anyone wants to talk about. As I 0:00:14.360 --> 0:00:17.119 record this, Europe is in its third heat wave in 0:00:17.160 --> 0:00:21.960 the last six weeks and records are tumbling everywhere. Grids 0:00:21.960 --> 0:00:24.640 are strained as more energy is needed to power fans 0:00:24.640 --> 0:00:27.479 and air conditioning, and the hot weather comes with the 0:00:27.560 --> 0:00:31.240 lack of the faintest breeze, meaning wind turbines un generating 0:00:31.320 --> 0:00:34.960 as much electricity. Nuclear plants have also been forced to 0:00:34.960 --> 0:00:38.159 power down because they can't cool as much as is 0:00:38.200 --> 0:00:43.559 needed for safe operation. But here's the thing. While the 0:00:43.600 --> 0:00:47.080 system is under stress, at least here in Europe we 0:00:47.360 --> 0:00:50.760 have a grid. In many parts of the world, especially 0:00:50.800 --> 0:00:53.880 in Africa, hundreds of millions of people still do not 0:00:54.040 --> 0:00:58.319 have access to reliable electricity, and year after year, as 0:00:58.360 --> 0:01:01.440 we make this podcast, the problem doesn't seem to be 0:01:01.480 --> 0:01:06.080 getting any better. In fact, since President Trump got into 0:01:06.200 --> 0:01:11.319 office last year, Western countries have cut development finance, the 0:01:11.360 --> 0:01:15.160 type of money that was crucial to bringing electricity to Africans, 0:01:15.720 --> 0:01:19.360 among other small matters such as food security and basic 0:01:19.440 --> 0:01:24.920 health support. This is zero. I am Afshadrati and this week, 0:01:25.480 --> 0:01:29.399 why is it still so hard to get climate finance 0:01:29.640 --> 0:01:34.000 to developing countries. Here to answer that question and many 0:01:34.040 --> 0:01:38.280 more is Philippe Walahu, chief executive officer of the Private 0:01:38.319 --> 0:01:41.880 Infrastructure Development Group, which over the past twenty five years 0:01:42.080 --> 0:01:46.319 has helped attract over fifty billion dollars in investment into 0:01:46.360 --> 0:01:54.640 infrastructure in developing countries. Philip, welcome to zero. 0:01:54.800 --> 0:01:55.120 Thank you. 0:01:55.680 --> 0:01:59.000 So you are CEO of the Private Infrastructure Development Group, 0:01:59.480 --> 0:02:03.600 one of the auganizations which has so many other organizations, 0:02:03.800 --> 0:02:07.520 has these acronyms that in the development finance will have 0:02:08.080 --> 0:02:12.320 become many and just so that we give some examples, 0:02:12.360 --> 0:02:18.119 there is BIGCFAIIB and these are not even the biggest 0:02:18.160 --> 0:02:22.359 ones in that sphere. So perhaps you can just start 0:02:22.400 --> 0:02:26.919 with giving us an overview of what PIDG does and 0:02:26.919 --> 0:02:29.440 what kind of infrastructure projects you build. 0:02:29.760 --> 0:02:32.359 I will, and on a light note, I was telling 0:02:32.400 --> 0:02:36.120 someone at one of the roundtables yesterday that I think 0:02:36.200 --> 0:02:39.080 my next project in the year or two will be 0:02:39.080 --> 0:02:42.440 too rebrands because the Private Infrastructure Development Group is of 0:02:42.919 --> 0:02:45.320 lengthy and there's got to be something a bit shorter 0:02:45.480 --> 0:02:48.200 and catchy. So in a nutshell, the best way to 0:02:48.560 --> 0:02:51.160 think of us is we work along the life cycle 0:02:52.120 --> 0:02:55.040 of an infrastructure asset from early stage project development all 0:02:55.040 --> 0:02:58.239 the way to construction and operation, and in so doing 0:02:58.520 --> 0:03:03.000 we make available number of products, including early stage patient capital. 0:03:03.360 --> 0:03:07.200 So this is to actually develop projects growth equity, so 0:03:07.320 --> 0:03:11.880 for projects that are trying to expand, local currency guarantees 0:03:11.960 --> 0:03:13.760 a big part of what we do, and then long 0:03:13.840 --> 0:03:17.080 term debt finance. So effectively we cover the full capital 0:03:17.120 --> 0:03:19.840 structure and the life cycle of an infrastructure asset. 0:03:20.200 --> 0:03:24.600 And in doing infrastructure, how much of your infrastructure nowadays 0:03:24.720 --> 0:03:25.720 is climate focused? 0:03:25.800 --> 0:03:29.240 So when we launched our new strategy in twenty twenty three, 0:03:29.280 --> 0:03:33.959 which runs to twenty thirty, we committed to having fifty 0:03:33.960 --> 0:03:38.360 to seventy percent of our projects in the climate finance space, 0:03:38.920 --> 0:03:42.160 and we have met that target. We'll probably at the 0:03:42.160 --> 0:03:44.600 media point, I think at sixty percent right now. 0:03:45.040 --> 0:03:47.960 So in twenty twenty five, your report says you've committed 0:03:48.040 --> 0:03:52.040 about a billion pounds to thirty three projects and that 0:03:52.080 --> 0:03:55.440 has attracted a further four point one billion dollars in 0:03:55.600 --> 0:04:01.160 co investment. Obviously, one of the metrics on which institution 0:04:01.400 --> 0:04:06.040 like yours take pride is this multiplier where you bring 0:04:06.080 --> 0:04:10.600 in public money from governments, but then that helps bring 0:04:10.600 --> 0:04:13.320 in private capital to build these projects because there's just 0:04:13.360 --> 0:04:15.680 a lot more private capital in the world. Talk me 0:04:15.760 --> 0:04:18.760 through some of these projects. Give me an example that 0:04:18.839 --> 0:04:22.039 you're proud of in the past year that you funded, 0:04:22.240 --> 0:04:24.040 or something that's been completed. 0:04:24.600 --> 0:04:26.080 I could go on and on, but let's give a 0:04:26.120 --> 0:04:29.279 couple of examples. We did a water project on a 0:04:29.279 --> 0:04:33.760 PPP basis, a public private partnership in Kigati in Rwanda, 0:04:34.400 --> 0:04:37.359 which is up and running and doing quite well. That 0:04:37.560 --> 0:04:41.160 provides putable water to half a million people in Kigaty, 0:04:41.560 --> 0:04:45.800 so it's a significant investment. When we were working with 0:04:46.360 --> 0:04:50.040 the developer, there were a number of features that included 0:04:51.160 --> 0:04:57.800 elevating the control centers, using submarine cabling and in both 0:04:57.880 --> 0:05:02.640 cases to ensure that during the flooding, both would be 0:05:02.720 --> 0:05:05.880 able to continue operation and provide portable water to Kigai, 0:05:06.240 --> 0:05:09.640 and indeed have been floods and they've been able to deliver. 0:05:10.240 --> 0:05:16.080 In Madagascar, we supported a solar power project Madagascal, because 0:05:16.120 --> 0:05:21.200 of climate change, is experiencing cyclones in the way that 0:05:21.240 --> 0:05:27.000 it didn't before exponentially, and so when you're developing a 0:05:27.040 --> 0:05:32.560 solar power project, typically the poles on which are mounted 0:05:32.640 --> 0:05:35.800 the solar panels are dug at a depth of one 0:05:35.839 --> 0:05:39.680 point five meters in that project working with a developer 0:05:40.200 --> 0:05:43.240 at a higher cost, but then you make it resilient 0:05:43.279 --> 0:05:46.760 for the future cyclones. Those poles are dug at a 0:05:46.800 --> 0:05:50.600 depth of three meters which allows the power project and 0:05:51.240 --> 0:05:54.440 the panels to stay still when you have that cyclone 0:05:54.440 --> 0:05:57.040 that comes through. And these are little things that working 0:05:57.080 --> 0:05:58.560 with developers. Yes, it's going to be a little more 0:05:58.560 --> 0:06:01.320 expensive upfront, long term it pays for itself. 0:06:01.720 --> 0:06:06.520 And Madagascar of course is a place of extraordinary biodiversity 0:06:06.880 --> 0:06:10.000 sort of sits as this big island off the coast 0:06:10.040 --> 0:06:15.560 of Africa, but also extreme poverty and climate impacts, not 0:06:15.600 --> 0:06:18.440 just the cyclones with droughts have caused a lot of 0:06:18.560 --> 0:06:25.440 hunger issues. So bringing cheap, affordable power is unlocking so 0:06:25.560 --> 0:06:29.600 much potential for the country. Now let's come to issues 0:06:29.600 --> 0:06:33.240 that are holding you back. We are seeing a growth 0:06:33.320 --> 0:06:36.839 in right wing movements across the world, especially here in Europe. 0:06:36.920 --> 0:06:40.880 Many of your funders are in Europe. How do you 0:06:41.000 --> 0:06:45.359 make the case for overseas development finance to the people 0:06:45.920 --> 0:06:49.200 in Europe who are who are right now choosing these parties? 0:06:50.600 --> 0:06:52.760 You know, how would you make the case for somebody 0:06:52.839 --> 0:06:56.360 living in an English village that the UK giving your 0:06:56.400 --> 0:06:59.360 money is a good use of their taxpayer pounds. 0:06:59.520 --> 0:07:03.320 It's a yes, it's a fair question, and I think 0:07:03.360 --> 0:07:08.039 it goes back to the point about us actively diversifying 0:07:08.040 --> 0:07:14.120 the source of capital and also finding and ensuring that 0:07:14.200 --> 0:07:17.160 we reach a path where that capital is no longer 0:07:17.200 --> 0:07:21.400 needed and so that there's a downward trend to our 0:07:21.440 --> 0:07:24.280 need for capital from the six governments because it will 0:07:24.280 --> 0:07:25.880 instead be coming from private sources. 0:07:25.960 --> 0:07:29.840 But don't you need to convince these governments, who then 0:07:29.920 --> 0:07:32.680 need to convince the people that this is still a 0:07:32.720 --> 0:07:35.400 good use of their money. What are you doing to 0:07:35.440 --> 0:07:40.680 help these governments make the case for overseas development. 0:07:41.200 --> 0:07:43.080 So what we try to show is that every dollar 0:07:43.120 --> 0:07:47.920 that is put in is going to membilize a larger 0:07:47.960 --> 0:07:50.600 amount of capital that would have otherwise not flowed to 0:07:50.680 --> 0:07:54.920 those countries. We can talk about the is it sixty 0:07:55.000 --> 0:08:00.160 seventy percent climate finance which helps reduce emissions across the globe. 0:08:00.360 --> 0:08:03.520 We could talk about how many, what percentage of emissions 0:08:03.520 --> 0:08:06.840 is or are the countries in which we operate responsible 0:08:06.880 --> 0:08:11.200 for Whilst in the North we are responsible for the 0:08:11.240 --> 0:08:13.440 large majority of those emissions. 0:08:13.440 --> 0:08:16.320 There is a moral argument, there's a justice argument, But 0:08:16.480 --> 0:08:19.400 what is the self interested argument that you would make 0:08:19.520 --> 0:08:25.800 to a villager that you know ten pence of your 0:08:27.320 --> 0:08:31.520 annual tax is going to go to PDG. 0:08:32.240 --> 0:08:35.400 So, in doing the work that we do, and we've 0:08:35.400 --> 0:08:38.439 only talked about renewal space is obviously much more than 0:08:38.559 --> 0:08:43.600 is happening. You're helping build and strengthen economies locally. It 0:08:43.640 --> 0:08:46.040 is in no one's interest, whether you're the small village, 0:08:46.280 --> 0:08:48.840 whether you're in London or you're in Paris to have 0:08:49.120 --> 0:08:53.319 economies tumble. In the emerging markets which we operate, that 0:08:53.440 --> 0:08:56.439 will have a ripple effect. And I need not describe 0:08:56.480 --> 0:09:03.880 that ripple effect. I mean it manifests itself in many ways. Immigration, unemployment, 0:09:04.160 --> 0:09:06.920 and where that leads is not a pretty. 0:09:06.640 --> 0:09:09.920 Broad well, refugees and then the right wing movement that. 0:09:09.960 --> 0:09:14.319 Grows stay away from that one. 0:09:15.400 --> 0:09:17.000 Why is that difficult for you to say? 0:09:17.000 --> 0:09:21.920 Though, no, it's not difficult, But you're absolutely right. It's 0:09:23.360 --> 0:09:25.160 so the point that I'm making. 0:09:25.000 --> 0:09:30.040 The connection is pretty clear. Is it politically not feasible 0:09:30.080 --> 0:09:32.880 to make of f actually correct statement? No? 0:09:33.760 --> 0:09:38.640 Absolutely, And so for us building strong economies, which then 0:09:38.720 --> 0:09:42.960 rebuts the arguments made by some elements on the right 0:09:42.960 --> 0:09:48.520 wing of the political spectrum helps. Well, I'm not sure 0:09:48.520 --> 0:09:50.720 it helps that people have in trench views, which in 0:09:50.760 --> 0:09:52.480 many instances they do have in trench views. 0:09:52.559 --> 0:09:56.960 But there is a problem clearly that because of lack 0:09:57.000 --> 0:10:01.920 of clear communication from governments, from financiers, and not blaming you, 0:10:02.040 --> 0:10:06.360 but just the whole community as a whole in showing 0:10:06.400 --> 0:10:09.880 the good that is happening that results in benefits to 0:10:10.760 --> 0:10:15.480 Western people and Western citizens, and something needs to be 0:10:15.520 --> 0:10:19.960 done to fix that communication gap because without fixing it, 0:10:20.040 --> 0:10:24.760 you are getting people making choices that are detrimental and 0:10:24.800 --> 0:10:25.800 they don't know about it. 0:10:26.000 --> 0:10:29.920 I couldn't agree with you with you more. The ability 0:10:31.040 --> 0:10:34.040 to communicate more widely the good that comes out of 0:10:34.040 --> 0:10:37.040 what we do is something that we have to work on, 0:10:37.480 --> 0:10:40.839 and you can include us in the mix because we 0:10:40.920 --> 0:10:46.280 have to do better. The bad stories sell and that 0:10:46.440 --> 0:10:49.720 is then latched on by these movements that you talk about. 0:10:50.280 --> 0:10:53.679 So I, as CEO, have a responsibility to get that 0:10:53.720 --> 0:10:57.680 word out. And if I'm building a state of the 0:10:57.800 --> 0:11:03.240 art treatment facility in Kigali that's providing water to half 0:11:03.360 --> 0:11:07.120 a million people, something we can all be proud of 0:11:07.240 --> 0:11:09.000 and something that I need to be able to communicate 0:11:09.000 --> 0:11:09.679 more effectively. 0:11:11.080 --> 0:11:13.960 If you look at the six governments that fund you UK, 0:11:14.080 --> 0:11:18.280 Netherlands with zil in, Australia, Sweden and Canada, or really 0:11:18.360 --> 0:11:22.400 any Western government right now, they're cutting their eight budgets, 0:11:22.480 --> 0:11:28.080 they're cutting their climate finance funding. This is a time 0:11:28.200 --> 0:11:33.200 when actually you need more development finance going into emerging 0:11:33.200 --> 0:11:36.360 economies which have been hit by dead burdens, which are 0:11:36.400 --> 0:11:39.600 struggling to be able to raise capital for very basic 0:11:39.679 --> 0:11:43.680 important projects for themselves. So this must have made your 0:11:44.040 --> 0:11:47.559 job at PIDG interesting more difficult, I'd. 0:11:47.360 --> 0:11:52.040 Say more interesting. So the massive drop in overseas development 0:11:52.040 --> 0:11:54.679 assistance or ADA as we call it, I think we've 0:11:54.720 --> 0:11:57.640 seen it coming and so for the past two three 0:11:57.760 --> 0:12:02.840 four years we've been quite busy exploring other avenues to 0:12:02.840 --> 0:12:06.040 diversify the funding base. And so, for example, if you 0:12:06.080 --> 0:12:09.320 look at our debt fund, which is the oldest instrument 0:12:09.360 --> 0:12:12.640 in the group, is now able to attract private capital 0:12:13.040 --> 0:12:16.720 private funding lines anywhere between five and ten years. So 0:12:16.880 --> 0:12:21.240 we have attracted people like Alliance in Germany. We have 0:12:21.280 --> 0:12:28.080 attracted Standard Bank appso Bank Standard Chartered SNBC in the UK, 0:12:28.200 --> 0:12:33.280 Phoenix now known as Standard Life that's on the dead side. 0:12:32.600 --> 0:12:36.280 And they're coming in into a development finance institution. 0:12:36.600 --> 0:12:41.160 Why for two reasons. One it allows them to get 0:12:41.200 --> 0:12:46.320 into the development space and diversify their own exposure and 0:12:46.400 --> 0:12:49.720 through a trusted vehicle. So you know very quickly if 0:12:49.760 --> 0:12:53.800 you look at our debt fund with exposure to twenty 0:12:53.920 --> 0:12:56.600 six countries between Africa and Asia and ninety percent in Africa, 0:12:57.960 --> 0:13:01.600 the fund itself or the portofit of projects is listed 0:13:02.160 --> 0:13:06.480 implicit rating of B minus that, according to the rating agencies, 0:13:06.480 --> 0:13:10.520 should produce an annual loss of one hundred to one 0:13:10.600 --> 0:13:14.400 hundred and fifty basis points. In reality, our last rate 0:13:14.480 --> 0:13:18.640 is twenty basis points and our recovery rate is higher 0:13:18.640 --> 0:13:20.520 than what you would find in Europe and North America 0:13:20.720 --> 0:13:21.640 at seventy eight percent. 0:13:21.920 --> 0:13:25.120 Does that, though, then lead to changing the rating itself 0:13:25.160 --> 0:13:27.440 because I have heard this before, which is there is 0:13:27.440 --> 0:13:32.440 a perception of risk in emerging economies that is not 0:13:33.160 --> 0:13:37.959 bearing on the reality. And this happens across many different 0:13:38.000 --> 0:13:41.320 types of capital stacks and different types of projects. But 0:13:41.400 --> 0:13:45.080 then it is the ratings agencies that really are able 0:13:45.160 --> 0:13:49.439 to drive large amounts of capital towards projects. Do they 0:13:49.480 --> 0:13:55.280 look at your performance and go we actually must correct ourselves. 0:13:55.320 --> 0:13:58.560 It's an interesting question. So the implicit rating of B 0:13:58.640 --> 0:14:00.800 minus is based on our own model language is based 0:14:00.800 --> 0:14:06.360 on Moody's and so it's generally well accepted. But yes, 0:14:06.400 --> 0:14:09.079 the discussion with rating agencies is a very interesting one 0:14:09.080 --> 0:14:12.120 at the present time. And I'm sure you're aware. The 0:14:12.240 --> 0:14:16.960 last year the md Emerging Markets and Developing Economies Taskforce 0:14:17.480 --> 0:14:21.480 was launched in the UK by the UK government and 0:14:21.560 --> 0:14:24.200 we are an active participant, as are a number of 0:14:24.240 --> 0:14:28.280 UK institutional capital providers. And there are a number of 0:14:28.320 --> 0:14:34.520 working groups, including working with rating agencies and seeing with 0:14:34.640 --> 0:14:37.640 the rating agencies how some of the structures and blended 0:14:37.640 --> 0:14:41.000 finance structures that are being put together can aspire to 0:14:41.080 --> 0:14:43.760 a different or better rating. And I think as the 0:14:43.840 --> 0:14:48.480 rating agencies will say, they're quite open to somebody providing 0:14:48.480 --> 0:14:52.320 evidence and coming to them to suggest an alternative way 0:14:52.480 --> 0:14:55.080 to suggest that their rating needs to be modified because 0:14:55.120 --> 0:14:57.880 of XYZX and so, at least in my career, it's 0:14:57.960 --> 0:15:00.440 really the first time that I've seen at a very 0:15:00.480 --> 0:15:05.120 senior level representatives from each of these stakeholders at the 0:15:05.160 --> 0:15:08.400 same table and having a very open conversation. And you 0:15:08.560 --> 0:15:12.280 will have seen some of the rating agencies last year 0:15:13.280 --> 0:15:17.120 data slight or some tweaks to their methodology which unlocked 0:15:17.160 --> 0:15:19.320 hundreds of millions of capital that can now be available 0:15:19.800 --> 0:15:23.800 because the rating changed. So those are currently active discussions. 0:15:27.120 --> 0:15:30.320 After the break. How has the emergence of cheap solar 0:15:30.760 --> 0:15:34.320 changed the climate finance landscape? If you enjoy what we 0:15:34.360 --> 0:15:36.600 do here at zero, please write us a review on 0:15:36.640 --> 0:15:41.880 Apple Podcasts, Spotify or YouTube. Recently, Roger Ig wrote, this 0:15:42.000 --> 0:15:45.920 is a fantastic show for piercing the information bubble here 0:15:45.960 --> 0:15:50.400 in North America regarding the energy transition. Thank you, Roger. 0:16:04.400 --> 0:16:07.440 We are now starting to see this across Africa because 0:16:07.480 --> 0:16:11.800 of the sheer cost of solar dropping. The amount of 0:16:11.800 --> 0:16:15.640 solar panels that have been imported across Africa over the 0:16:15.680 --> 0:16:21.320 past twelve to twenty four months have exponentially grown. I 0:16:21.400 --> 0:16:24.440 understand the point you're making about the fact that deeper 0:16:26.480 --> 0:16:31.440 structural changes require additional expense. But if solar is affordable 0:16:31.760 --> 0:16:37.160 and countries are starting to import these panels any which way, 0:16:38.000 --> 0:16:40.920 are solar projects still the ones that you want to support? 0:16:41.000 --> 0:16:42.920 Are there other types of projects you want to move 0:16:42.960 --> 0:16:43.560 on to next? 0:16:44.120 --> 0:16:46.960 So solar projects yes, because a lot of what we 0:16:47.000 --> 0:16:50.240 do is in off grid in a midigrid space. So 0:16:50.280 --> 0:16:53.440 when we're working in the north of Sierleone to provide 0:16:53.440 --> 0:16:56.360 twenty thousand people with access to electricity, these are people 0:16:56.400 --> 0:17:00.960 that have never before had a light bulb never And 0:17:01.080 --> 0:17:05.240 so those types of projects in the afterad minigrade space 0:17:05.520 --> 0:17:10.320 are not attracting capital from larger multilateral development banks or 0:17:10.359 --> 0:17:14.159 even the large DFIs because its views extremely risky. 0:17:14.720 --> 0:17:18.080 So even the Africa Development Bank would think of as 0:17:18.080 --> 0:17:20.200 he earlier on solar project to be risky. 0:17:20.400 --> 0:17:21.719 Well, something like that is going to be a bit 0:17:21.760 --> 0:17:24.040 small for what they normally do and they're going to 0:17:24.040 --> 0:17:26.159 be looking a lot at base power. So we are 0:17:26.200 --> 0:17:28.600 working with the African Devilment Bank because of their presence 0:17:29.000 --> 0:17:33.520 on the continent, but increasingly working with local or international 0:17:33.600 --> 0:17:37.639 developers in in a sense to create an aggregation platform 0:17:37.920 --> 0:17:41.320 because what happened over the last fifteen years I would 0:17:41.359 --> 0:17:43.600 call it naive money. A lot of naive capital has 0:17:43.640 --> 0:17:45.880 come into the market thinking this was the new El 0:17:45.920 --> 0:17:48.640 Dorado and there was a lot of money to be made. Well, yes, 0:17:49.000 --> 0:17:52.520 but in many cases you still required some concessional findings 0:17:53.000 --> 0:17:55.960 to make it happen. And so by aggregating on platforms, 0:17:56.000 --> 0:17:58.520 then you get the scale and then you can target 0:17:58.520 --> 0:18:01.280 a million two million people to to give access to literacy. 0:18:01.440 --> 0:18:06.640 Talk me through how closing a deal, maybe the Sierra 0:18:06.800 --> 0:18:10.080 Leone deal works. What are the big obstacles that you 0:18:10.160 --> 0:18:13.840 have to overcome, beyond the fact that size can be 0:18:13.840 --> 0:18:18.160 a problem for certain institutions to fund the same project, 0:18:18.640 --> 0:18:21.400 what do you need to do to convince yourself and 0:18:21.440 --> 0:18:23.600 of course your funders that this is worth backing. 0:18:23.760 --> 0:18:26.439 I mean, for us, it's about additionality. You're in a 0:18:26.480 --> 0:18:28.600 smile when I say this, but when I recruit someone 0:18:29.160 --> 0:18:31.280 in the final round of interviews, we say you're here 0:18:31.600 --> 0:18:34.320 to put yourself out of business. So first and foremost 0:18:34.400 --> 0:18:37.119 are we being additional? Are we displacing private capital that 0:18:37.200 --> 0:18:40.800 otherwise would go without us? And we have an internal 0:18:40.920 --> 0:18:43.879 mechanism to test that. And if we are displacing, then 0:18:43.880 --> 0:18:45.639 we're out of the deal. We shouldn't be in the 0:18:45.680 --> 0:18:48.520 deal because this is scarce capital. But beyond that, the 0:18:48.840 --> 0:18:51.520 key issue is if you look at sub Soerran Africa 0:18:51.560 --> 0:18:56.400 in particular, finding that growth equity is the most difficult 0:18:56.400 --> 0:18:59.000 part of the capital structure to find. There's plenty of 0:18:59.080 --> 0:19:03.399 capital available we're talking about pipeline or development pipeline projects 0:19:03.440 --> 0:19:06.159 that we need. Capital is there, but the equity is 0:19:06.240 --> 0:19:09.640 extremely scarce. And so when we are deploying and doing 0:19:09.680 --> 0:19:13.840 these aggregated platforms in a renewable space and solar space, 0:19:14.720 --> 0:19:17.399 finding like minded partners to put in equity. We're not 0:19:17.440 --> 0:19:20.560 talking massive amounts. We might put in fifteen, somebody might 0:19:20.560 --> 0:19:24.040 put in twenty. That is not easy. And then you 0:19:24.119 --> 0:19:27.720 have in some places to deal with regulatory issues that 0:19:27.880 --> 0:19:29.919 may or may not be a problem, terror issues that 0:19:29.960 --> 0:19:31.200 may or may not be an issue. 0:19:31.240 --> 0:19:35.280 And equity is scarce because it's riskier capital because if 0:19:35.320 --> 0:19:38.440 somebody invests in the project doesn't turn a return, well, 0:19:38.520 --> 0:19:42.400 equity holders take the losses first, whereas when you say 0:19:42.400 --> 0:19:46.120 there's plenty of capital available, that's more on the dead side, 0:19:46.119 --> 0:19:49.160 where if you lend and this project doesn't work, then 0:19:49.320 --> 0:19:52.360 at least the first moneys are recovered by the debt holders. 0:19:52.640 --> 0:19:58.000 Yes, and I suspect I don't suspect. There are two 0:19:58.040 --> 0:20:02.440 issues here. One is a risk return issue. So some 0:20:02.840 --> 0:20:06.920 developers that are backed by very large institutions view the 0:20:07.119 --> 0:20:09.320 return that is achievable in South Southern Africa in the 0:20:09.359 --> 0:20:13.479 spaces not commensurate with the risks they're taking, but equally 0:20:13.520 --> 0:20:17.320 we see people with unrealistic expectations of returns. 0:20:17.760 --> 0:20:21.560 Now, the conflict in the Middle East has created a 0:20:21.640 --> 0:20:25.720 momentum for clean energy in a way that energy shocks 0:20:25.880 --> 0:20:28.600 tend to do. We've talked a lot about that in 0:20:28.640 --> 0:20:32.399 the show. Looking at it from your perspective as a 0:20:32.440 --> 0:20:37.800 development finance institution, how have you seen the landscape change 0:20:37.800 --> 0:20:40.240 and what would that look like in the next five 0:20:40.320 --> 0:20:43.399 years that's different from what would it have been without 0:20:43.400 --> 0:20:44.160 this energy shock. 0:20:44.560 --> 0:20:49.160 So two points. First, I recently had a board meeting 0:20:50.080 --> 0:20:53.920 and we were providing an update on the impact of 0:20:53.960 --> 0:20:57.359 the Middle East war on our portfolio and what business 0:20:57.359 --> 0:20:59.239 would look like for the rest of the year, and 0:20:59.280 --> 0:21:02.240 I was sounding a conscious note as to ability to 0:21:02.240 --> 0:21:04.360 meet our targets for the year or ambition for the year. 0:21:05.960 --> 0:21:08.520 But then when I presented the business side and where 0:21:08.560 --> 0:21:10.600 we are at the mid year point, we're well on 0:21:10.720 --> 0:21:13.720 track because, notwithstanding what we're seeing in mid least, the 0:21:13.800 --> 0:21:18.800 demand and the proposals for transactions have been flowing in. 0:21:19.560 --> 0:21:22.320 And so the second point, which is extremely interesting this 0:21:22.359 --> 0:21:26.439 push for renewable as a result of what I'm seeing, 0:21:27.160 --> 0:21:32.960 is whether it's consumers or businesses. They're not going to 0:21:33.040 --> 0:21:36.399 wait for government at the top to enact the policies 0:21:36.800 --> 0:21:40.919 to ensure that we have diversified and move towards at zero. 0:21:41.400 --> 0:21:44.440 And so from that you're seeing a bottom up approach 0:21:45.040 --> 0:21:49.840 where people, individuals, communities, and companies or businesses are saying, 0:21:50.600 --> 0:21:53.040 I need stable power. And if I'm living in South Arin, 0:21:53.080 --> 0:21:57.320 Africa got abundant solar and wind hydro in some cases, 0:21:57.880 --> 0:22:02.000 so demand for us and not just us, other institutions, 0:22:02.320 --> 0:22:06.399 demand for our products is going through the rip. Frankly 0:22:07.240 --> 0:22:10.440 because of this desire to create self sufficiency. 0:22:10.960 --> 0:22:15.720 And yet if you look at the numbers, Africa accounted 0:22:15.880 --> 0:22:20.359 for just two percent of global clean energy investment in 0:22:20.440 --> 0:22:25.120 twenty twenty five. It has twenty percent of the world's population, 0:22:25.200 --> 0:22:29.800 and as you mentioned, the best potential for solar if 0:22:29.880 --> 0:22:35.840 not for anything else. Why then are the numbers so stark. 0:22:36.000 --> 0:22:41.960 Still, we go back to risk perceptions, and if you're 0:22:42.000 --> 0:22:47.240 making a similar return in Europe or North America and 0:22:47.320 --> 0:22:52.000 you speak to institutional capital, they will say, and I'm generalizing, 0:22:52.560 --> 0:22:54.680 why would I go through the pain of going through 0:22:54.680 --> 0:22:58.160 my investment committee when I've got a stable return in 0:22:58.200 --> 0:23:02.080 North America and or Europe. Part of my job, which 0:23:02.119 --> 0:23:04.880 I probably spend half the time doing, is dispelling those 0:23:04.960 --> 0:23:08.119 risk perceptions. So the task force, the AMD tansports that 0:23:08.119 --> 0:23:12.800 I referred to earlier is precisely or one of the components, 0:23:12.840 --> 0:23:18.560 is precisely about demystifying the risk and helping in this 0:23:18.640 --> 0:23:23.040 case UK institutional capital. And so we've seen some timid 0:23:23.040 --> 0:23:28.080 approaches and leading the way or showing the example. But 0:23:28.640 --> 0:23:31.680 you've given the statistics. I mean there's a huge long 0:23:31.720 --> 0:23:35.840 way to go. But I the risk perception is fundamental here. 0:23:36.440 --> 0:23:38.920 And we've talked about solar and batteries and they've become 0:23:38.960 --> 0:23:42.320 cheaper and clearly people now know these things exist and 0:23:42.359 --> 0:23:47.600 they want them. But if you're thinking as an infrastructure investor, 0:23:48.720 --> 0:23:54.760 what are the types of infrastructure today that are looking 0:23:54.880 --> 0:23:57.320 like where solar batteries were ten years ago. 0:23:57.760 --> 0:24:02.520 It's a good question and I think in many of 0:24:02.520 --> 0:24:05.560 the countries we operate, you're still a day one in 0:24:05.640 --> 0:24:07.680 terms of the soul in the battery. I mean, when 0:24:07.720 --> 0:24:11.840 you talk battery, in the last two years, I would 0:24:11.840 --> 0:24:15.040 say I've seen a massive jump. So in Malawi, we 0:24:16.359 --> 0:24:19.640 worked with a Canadian developer called JCM to develop over 0:24:20.160 --> 0:24:23.160 sixty megawat's the soul Power. One of the two plants 0:24:23.200 --> 0:24:26.600 has a battery storage, the first over in southern Africa, 0:24:27.720 --> 0:24:31.600 so two years ago that's extremely rare. You're right, you're 0:24:31.640 --> 0:24:34.800 seeing it, but it's still the very I would say nascent. 0:24:35.880 --> 0:24:38.320 I do think when I look at subser in Africa, 0:24:38.320 --> 0:24:43.600 but Asia as well, where we also operate, wind hasn't 0:24:43.640 --> 0:24:48.240 been tapped into in a way that it should. Offshore 0:24:48.280 --> 0:24:52.359 wind is till something people talk about. So Vietnam has 0:24:52.400 --> 0:24:54.680 been looking at it quite closely and there's a huge 0:24:54.680 --> 0:25:01.359 potential there. It's capital intensive and so those technologies, and 0:25:01.400 --> 0:25:04.800 then you have the electric mobility. I mean there we're 0:25:04.840 --> 0:25:08.280 seeing some very very interesting things, whether it's two, three 0:25:08.320 --> 0:25:14.240 or four wheelers in Senegalo. We supported a light electric 0:25:14.280 --> 0:25:20.120 buses in Dhaka, which is quite extraordinary. So I see 0:25:20.200 --> 0:25:23.639 that sector as an ascent sector. 0:25:24.000 --> 0:25:26.320 Yeah. I mean we've talked about ethiopy and the show. 0:25:26.800 --> 0:25:30.040 We wrote a feature story earlier this year looking at 0:25:30.160 --> 0:25:34.280 it's sort of two year anniversary of putting a ban 0:25:34.400 --> 0:25:38.159 on importing all fossil fuel cars and vehicles, and as 0:25:38.200 --> 0:25:41.159 a result of course, electric cars have taken off and 0:25:41.200 --> 0:25:44.440 so have electric buses in Ethiopia. But yeah, you're right, 0:25:44.440 --> 0:25:48.240 there's electric two wheelers in Kenya and in Nigeria that 0:25:48.280 --> 0:25:55.920 are taking off now. In terms of the biggest misconceptions 0:25:55.920 --> 0:25:59.400 in investing in the global South, we've talked about risk perception. 0:26:00.640 --> 0:26:02.400