Distinguished Guests,
Ladies and Gentlemen,
Welcome
On behalf of the OPEC Fund for International Development, OFID, I would like to welcome all of you to our Boardroom in OFID headquarters.
It is indeed a pleasure for me to open the 2nd IEF-OFID Symposium for such a distinguished gathering on such a timely and topical subject related to development: ‘energy poverty”. Given that energy poverty is at the heart of OFID’s mission, we are glad to be hosting this meeting in our headquarters.
OFID is also delighted to be a partner with the International Energy Forum in this important Symposium. Establishing a permanent Secretariat for the IEF was an initiative of OPEC Member Countries. Personally, I feel somewhat proud to have been a member of the small team who initially contributed to the establishment of the IEF Secretariat in my home city of Riyadh.
Since then, the IEF has shown to be a remarkable platform for fruitful cooperation between energy producers and consumers in the interest of the international community.
OFID
As you may all know, OFID is a development finance institution established 35 years ago by the Member Countries of OPEC with operations in some 130 countries. Through separate financial windows, OFID delivers its assistance by means of concessional loans, soft loans that support public sector projects, private sector projects and international trade financing as well as grants to support local capacity building and other social needs.
For instance, last Friday I signed in London, a US$200 million risk sharing agreement with JP Morgan. This program will enable OFID and JP Morgan to support an estimated incremental trade flow of approximately US$1 billion annually. Before that I was in Khartoum, where – as part of the mission program - I visited the International University of Africa, which is supported by OFID through a grant directed towards the construction of a girls’ hostel for the accommodation of yearly 256 female students.
As I try to illustrate, OFID has financed a wide range of operations in various sectors: education, health, agriculture, rural development, transport, water supply, microfinance, industry, communication, and of course energy, now totalling more than $ 13 billion and increasing every year.
Today, all OFID financial windows contribute to the alleviation of energy poverty. Indeed, OFID has developed a wide spectrum of financial tools ranging from grants to market-based instruments.
Presently, our financial tools are able to contribute to various types of energy projects ranging from a simple solar lamp or an efficient cook-stove to a mega power plant. Just this year, OFID has added a new energy facility to its Grants window that will support small-scale energy projects, many of which will be in poor rural areas. It is worth mentioning that recently, last June, our Members Countries have accepted to strengthen the resources of OFID with one additional billion dollars. This replenishment is the first of its kind in thirty years, making our 35th Anniversary this year all the more memorable.
International Environment
As a practitioner of development, I would like to share a few observations with you, but before that allow me to highlight the involvement of OFID in the growing international momentum on the fight against energy poverty:
□ In November 2007, OFID efforts towards alleviating energy poverty received greater impetus following the Riyadh Declaration endorsed by OPEC Member Countries’ Heads of State. A few months later, in June 2008, Saudi Arabia officially called for an initiative to help the poor have access to energy. It has since become the ‘Energy for the Poor Initiative’ to which the Energy Ministers, from the G8 and 15 emerging and developing countries gave their support in May 2009. Few months later; the G20 in Pittsburgh also gave its support to this initiative.
□ Later in March 2010, upon an initial proposal from OFID made at the first IEF Symposium on energy poverty, 66 Energy ministerial delegations attending the 12th IEF Ministerial in Cancun stated that reducing energy poverty should be added as the 9th MDG.
□ In September 2010, although the United Nations Summit on Sustainable Development did not introduce an additional MDG on alleviating energy poverty, the 65th UN General Assembly later decided to declare 2012 the "International Year of Sustainable Energy for All".
□ In June 2011, the Vienna Energy Forum launched concrete targets for 2030 and in September 2011 the Oslo Conference launched a new welcome Norwegian initiative to foster energy access in developing countries (Energy +).
□ Finally, on November 1st 2011, the UN Secretary-General announced his initiative “Sustainable Energy for All”. The first objective of this plan is to ensure universal access to modern energy by 2030.
To mobilize key stakeholders and encourage cooperation with this initiative, the Secretary-General formed a High Level Group. These 33 leaders from business, finance, governments and civil society have been tasked with the preparation of an Action Agenda to be presented at the Rio + 20 Summit in June 2012. I am honoured to be a member of this High Level Group.
OFID and global initiatives
As we have seen, there are many initiatives under way that are focusing on different aspects. OFID welcomes all of these initiatives since it will help raise the awareness of the importance of addressing Energy Poverty and ultimately will make a real difference on the ground.
We are of the opinion that the multiplicity of initiatives is a good thing as long as the goals are well defined. Synergies, harmonisation and common objectives should be sought.
Providing energy access for all by 2030 is an objective that we should all subscribe to.
Moreover, as it was pointed out at the Oslo Conference last October; all energy sources and technical solutions must be utilised to reach the goal of universal access in a sustainable manner: economically, socially and environmentally.
I think that it should be recommended to the IEF energy ministers to support the both ideas that I just mentioned.
Regarding OFID, we operate the “Energy for the Poor” Initiative within the overall international framework, I have just outlined. Our operational scheme is fully compatible with OFID’s active participation in other initiatives in particular the latest one of the UN Secretary General’s called “Sustainable Energy for all”.
To put action behind my words, as of Friday, November 18 2011, OFID will host for three days the first high level meetings and technical meetings of the UN Secretary General Initiative.
Point of view of a practitioner
Speaking as a practitioner in development, let me make some observations which may be useful during today’s discussions.
Political will and planning
First, in order for all the initiatives to work on the ground, we definitely need a sustained political will backed by a pro-energy access planning process.
Our practice, is to always keep our partner countries in the driving seat when it comes to prioritization of sectors and strategies of development. This approach respects the principle of ownership to which OFID is committed. More precisely, OFID endorses and implements all the international declarations on Aid effectiveness, that is; the Paris Declaration of 2005, the Accra Agenda for Action of 2008, and in a few weeks from now a high level OFID Delegation will be present at the upcoming 4th High Level Forum on Aid Effectiveness in Busan (South Korea).
The issue here is that, many poor developing countries still do not put a high priority on energy access in particular for rural areas. On the ground this lack of political will and prioritization translates into inappropriate regulatory environment especially concerning regional projects development, a clear lack of bankable projects and a low absorptive capacity regarding energy projects. We would like to see this situation changed.
The required sustained political will should be demonstrated by the inclusion in the National Plans and Poverty Reduction Strategy Papers of explicit targets for energy access services and power supply capacity. Ministries, public utilities are therefore expected to attach the highest priority to extending energy access. Nothing less will be sufficient to achieve progress towards our objectives. In my opinion this is a clear proposal worth to be conveyed to the IEF energy ministers.
OFID experience regarding this very point is that today we are entering a new pro-active phase. While preserving and reinforcing the ownership by concerned governments, OFID would like to assist them to translate their renewed willingness to fight energy poverty by implementing appropriate policies, developing projects and increasing their absorptive capacity. Indeed, recently we supported with a grant a UNDP plan to strengthen national level capacity for planning of energy related development activities in five sub-Saharan African countries (Tanzania, Kenya, Uganda, Benin, Togo and Sierra Leone). And just two weeks ago OFID and The Arab Bank for Economic Development in Africa (BADEA) agreed to support selected sub-Saharan countries to emphasize energy access in their respective national development strategies by financing studies for policy change and studies aiming at identifying relevant pipeline of projects.
Sustainable business models for the poor
My second, observation is that the success of any initiative will rely on the implementation of successful business models.
Regarding the poor strata of the population living with low income in peri-urban areas or widely dispersed over large areas: paradoxically, the poorer they are, the more they pay for energy. A key barrier limiting wider access to modern energy services by the poor is the lack of affordable, appropriately designed options to finance installation and purchase costs (the upfront costs). The market-based approach cannot finance these investment costs, the challenge is to scale up business models (innovative schemes) allowing the poor to access energy in a reliable, affordable and sustainable way. That is business models able to break the vicious circle of energy poverty.
In this regards, in addition to classic concessional financing of energy power plants, OFID has participated recently together with the Shell Foundation in a successful project involving small scale innovative financing schemes that allow the poor to have access to off-grid solutions such as solar lamps in remote areas of Kenya and Tanzania. Regarding end-user financing, we are of the opinion that all means aiming at reaching the neediest should not be neglected.
Unfortunately, there is no ‘one size fits all’ solution: in order to break the vicious circle of energy poverty, strong government involvement with pro-poor policies is necessary. In the field we can observe successful approaches such as:
- Developing Efficient Public Private Partnerships and supporting energy SMEs by Microfinance
- Creating appropriate tariffs with specific structures to ensure sustainability
- Providing targeted Subsidies that really reach the needy and subsidies aiming at financing the start-up cost of connection
- and wherever possible reliance on renewable energy in order to reduce the running cost.
Our experience has shown that two conditions are necessary for the implementation and successful sustainable business models:
- Strengthening or empowering local financial institutions to finance more energy projects.
- Developing local capacity building.
I propose that these recommendations be endorsed by the IEF energy Ministers
Ladies and Gentlemen,
Conclusion
In conclusion, I must say that I look forward to our discussions in this Symposium. I anticipate a positive and fruitful meeting since all elements are coming together to drive forward this most noble mission.
The IEF Ministerial is an important international gathering, Energy ministers are paying a key role in their respective countries; let us not miss this opportunity to convey to them the right messages.
This symposium provides the chance to cross-fertilize ideas. I am therefore confident that the recommendations to the upcoming 13th IEF Ministerial in Kuwait will add further impetus to the cause of universal energy access.
Thank you
Additional Information
Since the Riyadh Declaration of 2007, OFID has intensified its activities on the field. Indeed we have increased the share of energy operations to reach 27% of our Public Sector and Trade Finance portfolio in 2010. We have approved for all operational windows a total of more than 891 million US dollars in soft loans for 42 energy projects and operations in 29 countries. By adding the co-financing share of other development institutions participating together with OFID in energy projects, we reach a real impact on the ground exceeding US$ 9.3 billion. This is appreciable but certainly still not enough in comparison to the huge needs.