Chris Antonopoulos, the CEO of Lekela, boasts that you need the ‘the spirit of an adventurer’13 to build windfarms in Africa. Lekela is a London-based renewable power company, which has constructed the 160MW Taiba N’Diaye windfarm in Senegal. What is an investment adventure for some has the potential to destroy the basis of subsistence for others.
This windfarm is an exemplary case for how renewable energy production is turned into an asset, providing opportunities for profit-seeking investors that are predominantly based in the global North. This is enabled through an institutional environment of de-risking both by the Senegalese government as well as international development finance institutions, creating the safe and stable environment for European investors. The windfarm is viewed as an investable asset from which distant investors expect a rich return, but at the same time it is the home and site of contestation for the affected communities.
Senegal’s energy policy has been oriented towards creating a ‘de-risking environment’, enabling private energy production. In a recent reform of the power sector, the government shifted towards embracing private finance by removing regulatory barriers and creating a conducive environment for international investors. The core of the reform is the unbundling of Senelec, the national electricity company and off-taker – the purchaser of electricity in renewable energy projects, and the strengthening of private actors in energy production.14 IPPs tender for production rights, while the regulator’s long-term energy planning offers investors a stable basis for long-term investment decisions. The liberalisation of the electricity market opens the market for private energy production and domestic planning aims to make it attractive for foreign capital.
Following this policy direction, since the early 2010s the share of energy production from IPPs has risen to half of Senegal’s overall installed capacity, mainly through foreign direct investment (FDI). About half of the country’s solar capacity is owned by French companies.15 The colonial power is back – or perhaps never left.
The Taïba N’Diaye windfarm fits well within Senegal’s energy policy agenda. The French company Sarreol developed the project and later sold it to Lekela, which then developed it towards financial profitability with a loan from the Development Finance Corporation (DFC), the US government development finance institution, and an investment guarantee from the Multilateral Investment Guarantee Agency (MIGA), a branch of the World Bank. Lekela was owned by two European-based infrastructure equity funds with opaque ownership structures when the construction began and has since been sold on to other investors. Today, the windfarm consists of 46 wind turbines, a number which is soon expected to double, and currently affects more than ten villages with an estimated population of 25,000.
Private investors’ need for a high degree of security leads to a financing constellation and business models that merit closer examination. Lekela sells the produced electricity to the national energy company Senelec and uses the revenue to service the creditors’ loans and pay its shareholders the anticipated returns. Lekela is thus obliged to operate on a for-profit basis.
In order not to risk this cash flow, the business model is secured by fiscal de-risking. The Senegalese government provides a bundle of guarantees for electricity off-taking and the World Bank does the same for political risks, thus securing the investors against almost all kinds of jeopardy.
In a so-called Power Purchase Agreement (PPA), Senelec is contractually obliged to pay for all the energy produced – even if there is no demand for it, or the grid is overloaded. This guarantees Lekela’s revenue. Over and above this, Senegal also provides a sovereign guarantee to cover the possibility of Senelec defaulting on payments.
Investors may also choose to draw on so-called political risk guarantees provided by the World Bank, such as a political risk insurance (PRI) or a partial risk guarantee (PRG). These guarantees can be triggered in cases such as non-payment by Senelec and the state, expropriation, or war and civil unrest. Thus, apart from project- or technology-based risks, investors are hedged against virtually every form of insecurity.
The profit-driven logic behind the project financing and the need for constant revenues to serve the creditors shapes inequities at the lower end of the windfarm, namely in how it affects local communities. These inequities are even more striking in the contrast between Lekela’s own investment tales and grassroots dissent.
Investors like to narrate the story of developmental benefits of large-scale infrastructure projects like job creation. According to Lekela, a total of just 380 people have been employed during construction, all from the surrounding villages. However, villagers clearly express their frustration about this recruitment as the contracts are temporary and mainly in low-skilled.
This is even more problematic because people’s land has been expropriated for the windfarm, depriving them of their means of subsistence. About 420 farmers who have been affected by the windfarm have been compensated. Fair enough, the compensation has been above the usual national rate. While this could be seen as a noble gesture on the part of Lekela, the question of land represents the fundamental divide between the investors and the affected community. Leleka’s investment story proclaims a modernising – but imaginary – ‘from farmland to wind farm’, assuming progress and development, but conversations with farmers give a very different sense of the meaning of farmland – which means life, the basis for food and income. The compensation might alleviate their lives in the short term, but it cannot make up for the loss of their land. The issue of land brings colonialism from the past to the present. The prevailing idea of terra nullius justified the illegitimate Scramble for Africa during colonialism, organising land grabs for the colonial plantation economy in ways that we can still see in today’s patterns of extractivism.16
From the perspective of the investors, the windfarm is entirely a success story of modernity and development. It is assumed to have improved villagers’ lives such as by constructing a market place, an IT centre in the school or solar panels for local farmers. The official investment story is illustrated with women dancing to express their joy about the investments. It draws on almost every cliché in the book – exactly how Binyavanga Wainaina taught us how not to write about Africa.17
The story appears as pure philanthropy leading to progress in the surrounding villages while the investors occupy the moral high ground. As the investors proclaim, the project is ‘more than a windfarm’. What the story of Lekela hides is that the windfarm will generate stable, long-term revenues to the European developer, made possible through the de-risking instruments described above. This however shifts risks to the affected communities and onto the state’s balance sheets – and thus adds a further burden for the state budget and provides short-term profits for the private company.
Looking at the windfarm from a macro perspective shows how investments in renewables, even in a single windfarm in Senegal, are increasingly entangled in the circuits of global finance. Lekela has recently been sold to the operator Infinity, which owns many IPPs across Africa – it stretches belief that this sale took place without a rich return for the company’s previous owners. What this on-selling entails is a disconnect between the owners of the project and the community. At the very least, Lekela has been working with the local communities for several years. The new owner does not have this relationship, which risks undermining any responsibility and accountability for the impacts of the windfarm on local communities.18 Lastly, what is problematic at the macro-political level is the possible influence that the de-risking instruments grant to multilateral organisations. The threat to trigger a risk guarantee is a disciplinary measure, insofar as if the government does not pay, it must meet the guaranteed sum as the World Bank has the power to impose structural reforms in the energy sector, thus undermining state sovereignty.
The story of Lekela both conceals and downplays all these structural hierarchies. Its narrative includes only two roles: the benevolent European investor and the grateful recipients. Despite – or exactly because of – this narrative, let us not forget that the Taïba N’Diaye windfarm is an investment that affords powerful and wealthy investors a profit from selling electricity that the Senegalese population pays with their electricity tariffs.
It is therefore important to highlight that those who are affected by the windfarm formed a collective to defend the rights of the commune of Taïba N’Diaye (Taxawu Askan Wi), to confront the project developer, demand their fair share of the income and a right to a say in decisions affecting them. Given the financial superiority of Lekela and its power to define the investment narrative, it is crucial to see what happens at the margins, how people are struggling every day to counter financial power inequalities, and what these struggles tell us about the global financial structure.