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Foreign Affairs, Defence and Trade References Committee
11/05/2018
Australia’s trade and investment relationships with the countries of Africa

FISHER, Mr Rob, Chief Financial and Operating Officer, Windlab Limited

STEGGEL, Dr Nathan, Technical Director, Windlab Limited

Committee met at 09:01

CHAIR ( Senator Gallacher ): I declare open this public hearing of the Senate Foreign Affairs, Defence and Trade References Committee. This public hearing is for the committee's inquiry into Australia's trade and investment relationships with the countries of Africa. This is a public hearing, and a Hansard transcript of proceedings is being made. We're also streaming live via the web at www.aph.gov.au. I welcome everyone here today. Before the committee starts taking evidence, I remind all witnesses that in giving evidence to the committee they are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to a committee, and such action may be treated by the Senate as a contempt. It is also a contempt to give false or misleading evidence to a committee. While the committee prefers all evidence to be given in public, under the Senate's resolutions witnesses have the right to request to be heard in private session. If you would like any of your evidence to be heard in camera, please do not hesitate to let the committee know. If a witness objects to answering a question, the witness should state the ground upon which the objection is taken, and the committee will determine whether it will insist on an answer, having regard to the ground which is claimed. If the committee determines to insist on an answer, a witness may request that the answer be given in camera. As noted previously, such a request may be made at any other time.

Thank you both for your time. Information on parliamentary privilege and the protection of witnesses has been provided to you. Would you like to make a brief opening statement before we proceed to questions?

Mr Fisher : Windlab is an Australian owned and headquartered company based in Canberra and listed on the ASX. We own an atmospheric model and set of tools developed by our founders at the CSIRO some years ago. We use those tools to find the best wind resources anywhere in the world, and we do that from Canberra. We are effectively wind prospectors and developers. We have a team of people on Marcus Clarke Street. They can find windy hills in Queensland, Ethiopia, South Africa. We've been doing that for 15 years now. We've been working in Africa since 2007. In the time we've been in Africa we've developed a portfolio of 20 projects that range from early stage identification through to operating wind farms. We are operating two sites in South Africa that comprise 228 megawatts of generation. We also have sites across the continent. We operate in South Africa, Mozambique, Tanzania, Ethiopia, Zambia and Kenya. Two of those sites, in Tanzania and Kenya, are very well advanced, and we hope to start construction on those in the next year or so.

The reason we as an Australian company are in Africa is that there is a fundamental shortage of electricity. The continent is largely unelectrified, although admittedly that is not uniform: South Africa has high rates of electrification, albeit with ageing infrastructure and rolling blackouts and brownouts. A country like Tanzania might have rural electrification of less than one per cent. Electrification is an opportunity to assist African economic development. It is our view, and that of many industry experts, that the cheapest way to electrify Africa is with renewable energy. There is now strong evidence that wind in particular, and solar to a lesser extent, are the cheapest forms of new generation available today. Many African countries have expressed strong interest in adding wind farms to their grids.

The challenges we experience in Africa are principally around infrastructure. The grids in countries are limited, old and frequently run by state owned enterprises with little recent experience of new technologies and no experience of integrating renewables into a grid, all of which Australians have learned to do. We have a lot of renewables now in this country. We're adding to that portfolio every day and have learned to a large extent in Australia to manage the challenges that brings. We have 70-plus per cent renewable generation in South Australia. Although we had some highly publicised challenges there, we found ways to deal with them, and that expertise will be useful to African and other developing countries as they inevitably add renewables to their grids.

A lot of the financing we need to operate in Africa comes from credit support provided by development finance institutions like the World Bank. Funding and credit support has been provided in our markets from Finland, Belgium, the US and the UK. They are key components to together putting a financeable and constructible project in developing markets. Places like Tanzania struggle to provide the long-term credit backing we need to be able to build projects, but international institutions let us proceed. That's a key part of what we're doing over there.

Electrifying Africa will contribute significantly to the Sustainable Development Goals. Turning the lights on fundamentally changes the lives of people who don't have power, and being able to keep the lights on, as more generation is added, makes a real difference to the people in the countries we're operating in. That said, we're still a commercial operation: we think we can make money and bring it back to Australia, while also helping to achieve the Sustainable Development Goals.

Where we think the government can play a role is partly through supporting development finance institutions and helping them to recognise the value of renewables and the inevitable shift to renewables happening around the world, and partly through helping to share Australian expertise. As I said, we as a country are now an experienced renewable operator, and to the extent that we can get that knowledge out in the world and share it with developing and African countries, that will help us take advantage of the opportunities in those markets.

Dr Steggel : I am a co-founder of Windlab. I have travelled extensively in South Africa, developing a number of the projects there. I manage the technical team which has identified all of the opportunities we're looking at across Africa. Typically a single one of those projects can provide enough electricity for several million East Africans. We can make a huge impact, particularly in the light of the Sustainable Development Goals and so forth.

CHAIR: It has been a reasonably long week in parliament, and to come at 9 am Friday morning and find something completely innovative and new is quite refreshing. I have never heard of a wind prospector; I thought wind was there and you could feel it and hear it. Can you go into that a bit more? Do you measure duration? Is that over months or years? Do you have an algorithm that tests one gust of wind and tells you what's happening?

Dr Steggel : Prior to Windlab, 18 years ago I joined CSIRO. They had a group called the Wind Energy Research Unit, which was developing a bunch of innovative stuff. We developed a wind-mapping tool called WindScape. It take atmospheric models very much like what you see with your weather prediction for the next four days. We use a very similar model, but we run it in an historical mode for a number of years. We run that weather model down to scales of one kilometre on the landscape, so that we have—

CHAIR: Pilots would know this of course, Senator Fawcett.

Dr Steggel : a view of what the weather is like for every kilometre on the landscape. We then fill that in with a finer resolution model to get us down to 100 metres. To put that into perspective, we have mapped pretty much all of sub-Saharan Africa at 100-metre resolution from the desktop here in Canberra, and have identified many opportunities that potentially have very significant value to our company, as well as providing an enormous opportunity to help power large parts of Africa.

Mr Fisher : We're looking for wind resources that are consistent and predictable over the very long-term—so 10, 20 years. That comes about because of the interaction between atmosphere and land. The right shaped hill will produce a consistent wind resource on top, and we can predict and forecast that over the long term.

CHAIR: Thank you very much for that. The next thing in your opening statement that I was intrigued about was your mention of Finland, Belgium, the US and the UK. These funds are presumably at a commercial or development rate of interest. How do you get access to the funds? They're not free.

Mr Fisher : There is a mix. Some grants are specifically aimed at achieving development objectives. We have had free money, if you want to put it that way, in some cases. There is a spectrum of ways of supporting projects, from providing direct grants right through to some kind of credit support instrument, a political risk guarantee or insurance to back a contract with a government. We've seen a range of variations on that theme.

CHAIR: Is someone like Efic on board in respect of the provision of those funds?

Mr Fisher : We have spoken to Efic a few times. So far we have not found the right intersection between what they're doing and what we're doing, largely because we found commercial funding to do what Efic could have done for us. For example, we had a need for insurance bonds in South Africa, Efic looked at it, and we ultimately found a more effective in-country commercial solution. We are in contact with Efic. We talk to them regularly. As our projects develop, we will try to find an appropriate role for them. They don't do pure development funding in the sense of sustainable development or aid-type funding.

CHAIR: There seems an undeniable logic to your proposition of putting in place renewable power to light people's lives up for further economic activity. Should we be looking to foster Australian companies in this area?

Mr Fisher : Absolutely. Australia can—and does, I believe—support international institutions like the Green Climate Fund to some extent. They have explicit goals to fund and assist with the development of renewable energy in Africa. It's framed in climate change terms, but ultimately they are doing the same things we're doing.

CHAIR: Are there any opportunities in respect of the foreign minister's stated position of utilising the private sector and foreign aid together?

Mr Fisher : Certainly. There is an opportunity to deploy aid support funding in a smart way, not just handouts or grants. The opportunity to use Australia's funding to provide credit support to help companies like Windlab get comfortable investing in African markets is potentially a very low cost way of achieving those objectives.

Dr Steggel : We put a strong emphasis on community engagement and are very proud of the way we've done that in both Australia and Africa to date. For one of our projects up and running in South Africa now, for example, we set up a couple of community trusts that own equity in the projects, and dividends from those projects go towards socioeconomic improvement in the regions.

CHAIR: Before I go to Senator Fawcett and Senator Moore, can you put on the record, firstly, a broad assessment of the interaction you have with Australian missions in the region and assistance you may get from those people. Secondly, what came out of our hearing in Perth was that there were quite a large number of Australian mining companies in the region. The model they put to us is that, after their development extraction and rehabilitation phase, they want to leave behind viable economies so that the communities exist after the mines have been and gone, so to speak. I would have thought this sort of project you're talking about would be fundamental to that desired outcome. Perhaps you could put something on the record about that, if you have any knowledge.

Mr Fisher : Maybe I can start with a comment on our interaction with the Australian missions in Africa. We've dealt with the High Commission in South Africa. We've met Australian Austrade and embassy officials in Kenya, which I understand is where the East African mission is based. We've had good support, a particularly from Austrade in Kenya, in terms of getting to meet the right people in the Kenyan government. We now have a joint venture with one of the county governments in Kenya that has been well supported by Austrade and the staff in the county over there. Australia has a fairly limited presence, I think, in places like Tanzania and Mozambique. That's perhaps understandable. Kenya, I think, covers those areas. But we've been reasonably pleased with the assistance we've had out of Austrade and the embassies.

Dr Steggel : They've also provided minor support for things like getting visas in a hurry for staff over there that need to come over here for business meetings and things like that.

Mr Fisher : That is actually quite important to us. Because we do something that's fairly unusual, we don't find people know how do to do what we do. We need to bring our African staff over here to train them, and being able to get them in the country efficiently is certainly something that's important to us.

As far as leaving a legacy for the community, our projects run for 25 to 30 years. They're designed to operate for 25, and they can operate much longer than that. The other point, of course, is that the wind resource doesn't disappear at the end of 30 years; it's still going to be in place. There are opportunities to repower sites, so once our turbines finally wear out, they can pull them down and build new ones. So we will be in the communities we work in for a very, very long time. To the extent that can help other companies or other Australian entities leave a legacy, if they're operating in similar markets, then I think we would benefit from their good behaviour, if that makes sense. Certainly, we can help or interact with them as much as possible.

CHAIR: But you don't have any direct involvement as we speak?

Mr Fisher : With the miners?

CHAIR: Yes.

Mr Fisher : No.

Senator FAWCETT: Gents, thank you. That's a very encouraging presentation of what you're doing. I'll be interested to speak to you about your wind model later for a different application. It strikes me that the key value you provide is knowledge about where the best and most reliable wind is in terms of generating energy, which is similar to when a mining company explores and is looking for reserves. That data around the quality of what they found and where is the key intellectual property. I am coming to the issue of sovereign risk. In July last year the Tanzanian government passed a number of bills. One of the effects is that mining companies that do explore now need to actually present that information to the Tanzanian government, essentially, for publication, which means that the very thing that is the value added—your key intellectual property—could potentially be subject to a similar sovereign risk action by government. I'm interested to understand, in the work you've done so far, whether you have come across those kinds of sovereign risk issues. It's been cited to us in one of the submissions as the key risk and one of the key barriers as to why people are reluctant to invest in various countries within Africa.

Mr Fisher : I think we're very conscious of sovereign risk as it's played out for the mining companies because there is a nice parallel between what they do and what we do. We tend to find that policymakers around the word don't think of wind as a resource in the same way they think of gold or coal or whatever. To date, I don't think we've seen a suggestion we should be publishing our wind maps or any of our detailed information. We're very cautious about what we let out into the world for the reasons you identify. We keep our maps pretty close to our chest. In the markets we are operating in, we've already gone out and secured many of the best sites, if not all the best sites, in those markets. We've acted early. We've put land leases in place. We've got joint ventures with local governments, which I think reduces that risk for us. The reality is that at some point we will have physical spinning machinery in-country, and that is very much subject to sovereign risk. Laying that risk off through development, finance institutions, bringing in local partners to invest in our projects is really the only solution to that. We're very much exposed longer term to sovereign risk.

Senator FAWCETT: While we're discussing risk, another barrier that has been highlighted in a number of countries is the physical risk to teams on the ground. Has that been a barrier for you? How are you addressing that? How do other companies who want to start investing in the various nations within Africa overcome that hurdle?

Dr Steggel : We've recruited local people. We've got an office in Tanzania, an office in Nairobi, and a fairly large office in Cape Town. We have local teams there who know the landscape, who understand those local risks, if you like. To a large extent, when we were first operating in South Africa, it was very similar to operating in Australia. Now that we've moved into other countries, such as Tanzania and Kenya, there are definitely different risks when our staff are travelling around.

Mr Fisher : Just like mining companies, we're in remote parts of these countries, often with poor infrastructure and facilities. We go to some lengths to make sure that we have up-to-date intelligence on the markets. When we send peopled out into the field, we take, where necessary, security people with our staff. They were in Ethiopia last year and had a convoy to help them get about the place We're conscious of not going to parts of Africa that are known trouble spots. We get political and security information regularly through our insurers and through private services. But it is a real risk operating in those countries. There are dangerous places.

Senator FAWCETT: Do DFAT's travel advice for some of those nations have an impact on your ability to conduct commercial activities there?

Dr Steggel : There are definitely some parts of nations that we just won't go to, and that's driven by DFAT. We will look at other governments' advice as well, such as UK or US government advice, to make sure we have as much information as we can.

Mr Fisher : We pay for a private security service to advise us on where we should be going and where we shouldn't. I think DFAT is good at a high level. We tend to need very specific information. There are bits of Mozambique where you simply won't go to this village but you'll happily go down the road. We can get that level of detail through a private consultant.

Senator FAWCETT: Sure. You talked before about Efic. Have you seen situations where you think Efic would help in terms of getting the funding, the risk and a range of other factors? Are there areas where commercial lenders or other partners need capital that you can't access commercially?

Mr Fisher : I think less capital and, again, more credit support. If Efic is able to take risks to put guarantees in place, to put insurance in place, that we can't get commercially, then there is a role for Efic. I can see that being important in projects in places like Tanzania, where we will ultimately sign a power purchase agreement with TANESCO, the national utility. That utility is not particularly credit worthy, to be polite, and there could easily be a role for Efic to come in and help to guarantee payments under that agreement. Whether it's Efic that does that or whether it's the Word Bank or a 'powering Africa'-type institution, we will speak to all of them. To the extent Efic can be involved then we would love to have them as part of the project.

Senator FAWCETT: You mentioned credit worthiness. We've seen in a number of nations, not Africa necessarily, but in other regions where Australian business has been interested to do work. The financial systems of that country have not been recognised as part of the global banking system, which has made it really difficult for businesses to transact. Do you have that problem with any of the nations in Africa that you are interested in? If so, are there measures that could be taken, whether it's through global institutions or the Australian government unilaterally, where you think improvement could be made?

Mr Fisher : I don't think we've encountered that particular problem in the countries we've operated in. There are international banks operating, particularly South African banks, and we have good relationships with those banks through our South African work. I think we've found that there is a reasonably strong African network of financial institutions, so we simply haven't had the problem that I think you're referring to.

Senator MOORE: The way our international development program operates is that it's necessary that we work with the needs of the country which we're discussing our program with. So we have a very strong view that you don't impose; you respond to what countries are asking for. A lot of the submissions say we should be doing more in Africa—and that's fine. But, in the work that you're doing, you've identified the infrastructure as a real deficit in most of the localities. Is that something that the governments themselves are identifying as a major issue? And do they prioritise that in their requests?

Mr Fisher : It's hard to generalise.

Senator MOORE: Absolutely.

Mr Fisher : Different countries have very different responses. When we look at somewhere like South Africa, they have clearly identified replacing their power system and improving their power system as a key priority for the country. Notwithstanding the recent issues with President Zuma, there's a long-term program there to build renewables, to build the transmission infrastructure, to support that transition in the generation system.

Senator MOORE: And that's in their budget and in their program?

Mr Fisher : Yes. It's a long, long-term plan. It's a five- to 10-year plan to address the change in the generation system. I think other countries have seen what South Africa has done and that program has been spectacularly successful. The price of power they procured through that program has come down had, I think, fallen by 60 per cent in four years from wind and solar. Other countries are seeing that happening, and I think it's just starting to move towards prioritising generation and the infrastructure to support it. But it's in its infancy in many of the countries we work in.

Dr Steggel : It's probably worth pointing out that somewhere like Ethiopia, for example, does have quite an advanced program now for new generation. They're lucky enough to have very significant not just wind and solar but geothermal and hydro as well. With that combination of all four, they are looking to become a net exporter to the rest of Africa, or at least to the surrounding regions.

Senator MOORE: I always check my map any time I have anything to do with Africa.

Dr Steggel : They want to go north all the way up to Egypt, for example, and south into Kenya and beyond.

Senator MOORE: That's a big program.

Dr Steggel : It is a big program. Nations such as Tanzania, Kenya and Zambia are involved with large-scale transmission development that will interconnect that entire region. Once those interconnections come online, that presents a big opportunity for our company because then there will be somewhere for our power to go, essentially.

Mr Fisher : Ethiopia is starting from a point where I understand their annual power consumption is not too far off what Canberra uses. Anything from there is a huge change to build the kind of capacity they're talking about. There would be a large investment just to build the transmission lines, the physical infrastructure, to make the generation possible.

Senator MOORE: And change the world in terms of the process. What we've found is that there are many, many international organisations that work to support their industries. I'm wondering, particularly in the African context, are there international renewable energy groups that work together in raising awareness about your forms of energy and then going to different UN groups and so on? I notice that a lot of the submissions talk about the different bases working with the UN. The UN is all over Africa and particularly in Ethiopia. I think Ethiopia is the UN centre of Africa, so a lot of money and a lot of meetings are held there. Is there a network for renewable energy?

Mr Fisher : There are a number of organisations that specialise in power, and not just renewable power. For example, there's an organisation called Powering Africa, which is American-funded. I think they got $10 billion out of the previous US administration to fund the development of power in Africa. We work with a UK organisation called Globeleq, who are part of the Commonwealth development funding. Their sole goal is to electrify Africa. Both those organisations are doing a lot of work with governments to help them understand what's necessary to build power generation and to communicate about renewables as part of that, and to help frame policy in all these countries.

Senator MOORE: Are many Australians involved in that?

Mr Fisher : We haven't come across too many, no.

Senator MOORE: Right. But there are some?

Mr Fisher : I'm sure there are.

Senator MOORE: Good. It's just that international focus seems to be so important in actually drawing attention. I know the UK government has had a focus on the development of energy for years, but I didn't know about the American one. Again, it's a philosophical approach to the issue of making energy available to the areas.

Do you find a difference between the growing cities and the vast regional areas in Africa? If you go to any of the countries you've mentioned, the capital cities seem to be growing immensely and have access to a lot of facility. But when you leave the capital cities, it seems to drop off really quickly. You go into areas with significant poverty—the landscape is often so much affected by drought and other issues as well. There are a number of impacts coming on the country at once.

Dr Steggel : It's definitely the case that there are significantly lower electrification rates in the rural areas than the urban areas.

Mr Fisher : I think Tanzania's 16 per cent electrified and rural Tanzania's 0.6 per cent electrified.

Senator MOORE: That sounds about right.

Mr Fisher : It's a stark difference.

Senator MOORE: So the work that you're doing is on the idea of linking into some form of grid process; that we'd give power across the board? You'd set up your sites generating wind energy that would then have to feed back, and that would be able to be spread across the whole of the areas?

Mr Fisher : We will feed into a national grid, whatever that might mean in a particular country. There are perhaps other initiatives that are more useful in remote areas. We talked earlier about solar and battery, small microgrids, smaller generators—

Senator MOORE: Which are focused on one region or one community.

Mr Fisher : On one region that isn't connected to the grid. We tend to operate in larger, industrial-scale generation. That can be sent wherever the transmission lines take it.

Senator MOORE: Thank you.

CHAIR: I can't let you go without asking this question. You've obviously had some intellectual property, you've capitalised on it, you've marketed it and you've floated it on the ASX. You're successful, according to what I've just read—probably a good bet for my grandkids' shares! Why should the government do anything for you? You're on your way. What should the government be doing in this space—and can you make it as succinct as possible for our staff, who write these recommendations?

Dr Steggel : From my perspective, it comes down to the Sustainable Development Goals. If we're really serious about supporting those, I think it's what I said at the beginning—a single project that we work on has the potential to add enough generation to the supply of what a couple of million average East Africans would currently consume. It's a very high-impact industry that we're working in, in terms of bringing electricity to parts of the world that really need it.

Senator MOORE: The use of the term 'Sustainable Development Goals' is something about which I'm very interested. In your industry, do people talk that language? I recently attended a function with the extractive industries, and they're all over it in the discussion and their papers. They talk to each other about what they're doing. Is that happening in the energy field?

Dr Steggel : Not in Australia. In Africa, I suspect it is being used a lot more.

Mr Fisher : Very much in Africa. Even to the point when we go and raise finances for a project, being able to demonstrate that we are operating in accordance with those goals, with the Equator Principles, and making sure we've done proper development is key. It's very well understood.

Senator MOORE: I've noticed that in some of the submissions, that people who are in the field use the terminology and link their work to the goals. I just wanted to get that on the record. Thank you.

CHAIR: Thank you very much for your evidence and appearance here today.

Mr Fisher : Thank you.

Dr Steggel : Thank you.