US President Donald Trump’s expressed support for coal, oil and gas may lift restrictions on the ability of multilateral investment guarantee agencies, such as the World Bank, to back projects like coal-fired power stations, Ernie Thrasher, CEO of Xcoal Energy Resources, said on Wednesday.
Although the World Bank approved a $3.75bn loan to Eskom in 2010 to build the Medupi power station, it was conditional on $750,000 being used to finance renewable energy. In 2013, the World Bank decided it would finance coal-fired power only in "rare circumstances".
Thrasher said, at a panel discussion on securing finance for mining from partnerships and off-take agreements, that the Obama administration’s stance had affected developing countries that needed low-cost power to develop their economies. Trump’s friendlier policies towards fossil fuels might also encourage the US to resume support for clean coal technologies, on which China was now more advanced.
Thrasher said traditional banking finance for mining had dried up so the main sources of finance were private equity funds, which wanted to see an off-take contract in place to guarantee revenue, particularly in Africa where the risk profile was perceived to be higher.
Graeme Robertson, chairman and CEO of Intra Energy Corporation, said the greatest opportunities for energy projects in Africa outside SA were East Africa, Ghana, Senegal and Ivory Coast, and that there was no such thing as cheap energy, but it could be reliable and clean.
One of the problems for financing in developing countries was that accounting standards often did not meet the requirements of international banks, Robertson said, but as Asian markets were maturing, capital was seeking better returns and was attracted to Africa. Thrasher said China was not the only country from which to source finance; Japan, Korea, Taiwan and India were also growing and seeking raw materials.
Sariel Polatinsky, global head of copper for Noble Group, said for traders seeking energy resources and minerals, Africa was an important region. Traders were willing to finance mining projects but wanted a turnaround of up to 24 months on capital, which made them different to banks.
Off-take agreements were key for traders. In certain countries, such as the Democratic Republic of Congo where financing was expensive for small to mid-tier miners, traders could help bridge the gap between mining and marketing because of their logistical expertise.
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