Interview with Marcel Hanen, Citi bank Industry Head for Corporate Banking, EMEA Power & Utilities

TanzaniaInvest interviewed Marcel Hanen, Citi bank Industry Head for Corporate Banking, EMEA Power & Utilities during his visit to Tanzania for the Powering Africa 2014 Summit that took place in Dar es Salaam. TanzaniaInvest and Mr Hanen discuss CITI’s view on the power and energy sector in Tanzania, the challenges and the opportunities available and the bank’s commitment to this growing market.

TanzaniaInvest.com: Why did you decide to come in person to Tanzania? What are your expectations on power and energy in this market?

Marcel Hanen: The Powering Africa conference was a great opportunity for me to visit Tanzania and obtain a good understanding of the various initiatives and developments taking place in the Tanzanian power sector.

Being responsible for the EMEA region, we do a lot of business across Europe, the Middle East and Africa but I do believe we can do much more in Africa given the enormous need for developing power infrastructure assets in generation, transmission and distribution.

In Tanzania, access to electricity has improved dramatically from only 12% of the population back in 2005 to about 21% today, while the government aims to reach 30% by 2016.

There is also a huge demand for electricity from businesses and industries, and having access to sufficient electricity will accelerate economic growth in Tanzania.

Citi is very keen to be part of this and to find ways to support investments in the power sector. 

{xtypo_quote_right}We are very focused on Africa and are also looking at how we can help develop the power and infrastructure sector through project finance{/xtypo_quote_right}

We are very focused on Africa and are also looking at how we can help develop the power and infrastructure sector through project finance.

Citi supports the Obama administration’s Power Africa initiative, which creates a lot of momentum to work with the multilateral agencies to make power projects financeable.

TI: Based on your experience in power and utility what would you identify as the greatest challenge for Tanzania to reach these ambitious objectives?

MH: I always like to think in terms of opportunities which, as I mentioned, are plenty, given the need for additional power infrastructure assets in Tanzania.

I guess the key challenge will be to find a framework under which investments in the power sector can be developed and made financeable.

Independent Power Producers face challenges in obtaining financeable Power Purchase Agreements (PPA’s) and it would beneficial to have more clarity early on in the process on the terms of these PPAs to be able to facilitate the development of new power generation projects.

As Citi, we would like to support our clients as long as there is a financially and economically viable proposition and we can make these projects financeable.

We will require the involvement of multilateral agencies to support projects by providing partial risk guarantees.

We do need their support to mitigate the risks inherent in developing independent power projects in Africa and in Tanzania.

We also need to have a power industry framework that is consistent and sustainable to make all parties involved comfortable in investing in these types of projects.

That requires the collaboration of multilateral agencies, the financial sector, the sponsors, the regulator and the government to make sure that all the ingredients are there to ensure a viable investment climate.

TI: In which subsector of power in Tanzania can you find projects with the highest potential to be viable?

MH: You have to look at the entire value chain from power generation to supply.

Everybody would think of power generation as the most viable part of the value chain that can be developed by independent power producers from the private sector and to a large extent that is true.

At the same time, if you invest heavily in power generation, this has to go hand-in-hand with investing in transmission and distribution infrastructure to be able to deliver electricity to the end consumers.

So the easiest is to start with providing a framework that allows the private sector to invest in power generation.

TI: What is Citi’s unique value proposition in financing power in Tanzania?

MH: We have on-the-ground presence in Tanzania with a staff of more than 50 people.

We have been in Tanzania since 1995 and have a very good understanding of the local economy and how business is done in Tanzania.

In addition, we operate in more than 40 countries in Africa with teams on-the-ground in 16 countries, including key markets such as South Africa, Nigeria, Ghana, Kenya, Tanzania and Egypt.

 

{xtypo_quote_left}We understand the economic and business environments, and I do think this is a key differentiator in being able to support our clients in doing business in Africa{/xtypo_quote_left}

We understand the economic and business environments, and I do think this is a key differentiator in being able to support our clients in doing business in Africa.

Specifically for the power sector, we have very strong capabilities across the region.

We have a team of about 20 industry bankers, exclusively focused on power and utilities, which support our local offices in providing industry content and best practices to service our clients.

So any specific power-related project in Tanzania that we will look at will be done by our local office team in combination with our industry bankers, complemented by other resources within Citi as required, to deliver the best execution and achieve the best results for our clients.

TI: Marcel, this is your first business trip to Tanzania, although you have been here before on a personal basis. How would you explain, based on your experience, what is Tanzania about today?

MH: Tanzania is a very exciting place to be.

A lot of changes are happening in the power sector with the commissioning of the Mtwara – Dar es Salaam gas pipeline, the various CCGT power plant developments in Kinyerezi, also with involvement of the private sector, and the material investments that are being made by Tanesco in power infrastructure over the next couple of years, which will accelerate economic growth in Tanzania.

 

{xtypo_quote_right}Tanzania is a hugely interesting market with great opportunities{/xtypo_quote_right}

As such, Tanzania is a hugely interesting market with great opportunities.

 

At the same time, we need to work with multilateral agencies, the government and the sponsors to overcome the challenges to make projects financeable so Citi can support our clients and support Tanzania in increasing the availability and accessibility of electricity.