“Credit guarantees enable developers and investors to support power project pipelines and achieve success through scale”

Exclusive interview with Christopher Olobo, CEO of Dhamana Guarantee Company in Kenya and speaker at the Enlit Africa conference in May.

Interview summary:

Christopher Olobo, CEO of Dhamana Guarantee Company in Kenya, explains how credit guarantees mobilise domestic capital into infrastructure and energy projects. He highlights investor demand for renewables but notes many projects are not bankable, with challenges around developer capacity, project structuring and off-taker credibility. Dhamana absorbs credit risk to de-risk investments, enabling banks and pension funds to deploy capital into minigrids and solar. Olobo stresses that guarantees must be mainstreamed, driving bankability, standardisation and scale, so Africa achieves success through pipelines rather than isolated projects.

Please introduce yourself and tell us what you do.

My name is Chris Olobo and I am the CEO of the Dhamana Guarantee Company. I also double as the Board Chair of the Africa Minigrid Developers Association. At Dhamana, our focus is to mobilise domestic capital into infrastructure and energy assets across Africa. With respect to the Africa Minigrid Developers Association, our focus is really on how we mainstream minigrids into the energy access across Africa.

Turning back to Dhamana, it’s a credit guarantee company that was set up by very credible shareholders, the African Development Bank, the UK’s Private Infrastructure Development Group (PIDG), the Africa Finance Corporation and a local pension fund in Kenya called CPF, the County Pension Fund, with a mandate that is very simple: How do we mobilise local domestic capital into infrastructure?

Our concept is actually quite simple, but the impact of the concept is huge. That impact creates the opportunity for capital to be deployed into energy projects that would otherwise not have been deployed.

Have you seen a tangible shift of investments into renewable energy projects on the continent?

That’s a very interesting question. Yes, there is a shift, but actually the shift is not even, and why do I say it’s not even? So on the demand side, we have investors that are increasingly, because of their ESG mandates, they want to deploy into renewable energy projects. So the demand is there. But on the supply side, that’s where we have an issue: projects are not bankable, projects are not guarantee-ready. So the opportunity for us at Dhamana is bridging the gap between the capital that is there but the projects are not ready. So we use our guarantee to de-risk that and enable the investors to deploy into the sector.

What are the other challenges in your view?

The challenges are quite unique. From a financier’s point of view, we’re trying to help capital moving. There are three main challenges and these centre around who is developing the project, challenges at the project level and challenges around who is going to make payment.

So let me just explain that. So who is developing the project? Do they have execution capacity? We’re seeing so many developers come with projects they want to develop

that vary in size. Do they have the capacity? Do they have a track record? That’s challenge number 1.

Challenge number 2 at the project level really relates to structuring. Has this project been structured correctly? Is it bankable? Can we rely on the cash flow forecast? Is it going to turn into what you have told us?

And then challenge number 3, who is paying for it? Is the off-taker credible? What’s their credit rating? Do they have a track record of paying? So to my mind, these three challenges are the biggest issues to financing.

If you are mitigating risk for the investor, that should make it a good opportunity for them?

It should make it a good opportunity, because what we do at Dhamana is to absorb this credit risk. At the end of the day, investors are interested in one thing, cash flow and revenue predictability. Number 2, they’re interested in the predictability of the contractual framework. If I’m going to invest in a project for 10–15 years, can I have certainty that the contractual framework on Day 1 is going to be the same on Day 15?

Lastly is the risk allocation at the project. For example, if there’s going to be land acquisition, is it truly the government managing that or is that risk going to be mine as an investor?

So at Dhamana, we help to absorb that risk and what the investor faces is going to be Dhamana’s risk and that helps them to then deploy, because they can now deploy on the back of a credible guarantee company that is highly rated across East Africa. Is there a particular success story in your career that you can look back on, saying that that really made a difference to a specific community? Such a story across my career can to be viewed through different lenses. I’ll start with myself. Before coming on board as the founding CEO of Dhamana, I had a very stable job. So moving from my stable job into a credit guarantee company to me is already a very big success story, because it has placed me at the front of the change that we need to see across Africa.

Now, whenever we look at what we’re doing at Dhamana, success to me would not be a single project, but the guarantees that Dhamana is providing to the market and how it is changing investors behaviour across the asset class. And when I see, for instance, looking at transactions where a bank typically had never deployed into the minigrid space, now they’re deploying across 13 minigrids in a remote part of East Africa. Is that success? Absolutely.

Number 2, when we see banks that have historically deployed 4-year money and are now deploying 7-year money into the solar space, is that success? Absolutely.

When I go to conferences like this one and pension funds are saying they’re instructing their fund managers to deploy into this asset class, that has to be success, because collectively that is creating an impact. And to me success cannot be a one-off event, but success is sustained through credible pipelines that will enable us to unlock East Africa.

There’s $200 million worth of local currency liquidity. So success is if we unlock that liquidity into energy projects, into distributable renewables, that is success.

You’re at the Enlit Africa conference and expo, and you are a speaker on the programme. What is your message?

First of all, Cape Town is a very beautiful place to be, the Mother City. And so I have to thank Enlit for inviting me. And the Cape Town marathon is happening on Sunday, so I will stay and run the marathon too. So I can see Cape Town through the eyes of a runner.

But at Enlit Africa, my message is very simple. For guarantees to be successful, they don’t have to be a support tool. They don’t have to be an afterthought. Guarantees must mainstream. So, as governments are thinking through systems, guarantees must be embedded into the entire ecosystem of financing, not an afterthought that you try to plug in. That will not work.

So the key messages that I will be pushing at my session is how are guarantees driving bankability? And the message is simple: Guarantees are helping to de-risk. So the risks I talked about, guarantees are de-risking these to enable capture to flow. Guarantees are enabling developers and investors to look at pipelines and not individual projects. In Africa, we will achieve success through scale and not through individual projects.

Lastly, what guarantees are doing is standardising. I can tell you, if you don’t have a standard product that is simple, then investors and credit committees will be very shy to deploy capital. So that’s my message. And at the end of it, I want to leave Enlit with people believing that guarantees are mainstream and not looking at guarantees as an afterthought. Thank you