INTERVIEW: “German Companies Need Guarantees from Govt to Sign Long-term Offtake LNG Contracts” – Liebing, Conjuncta CEO
The Conjuncta Group is a German investor and project developer specializing in investing in companies and projects in the fields of infrastructure, renewable and conventional energy production, grids, raw materials projects, the health industry, and other sectors. Stefan Liebing, CEO of Conjuncta GmbH, in this interview with Ndubuisi Micheal Obineme, Managing Editor of The Energy Republic, discusses how his company has been investing in Africa and its plans to expand its investment portfolio across Africa.
Furthermore, Liebing also provided more insight into the possibilities of Germany doing business with Nigeria on LNG and hydrogen deliverables. Excerpts:
TER: Please tell us about Conjuncta’s business activities in major industries.
Leibing: Since 2011, we have been operating and focusing on the development of investment projects and business opportunities. Our regional focus is in Africa, the Middle East, and Central Asia.
We have been active in Africa over the years and we are developing several infrastructure projects which include energy, oil and gas, chemicals, renewable energies, and more recently hydrogen.
Before we set up this business, I was working with Shell on oil and gas, LNG, and other activities within the company.
TER: What role does your company play in terms of project development?
Leibing: At the moment, we have a lot of hydrogen projects including in Angola in partnership with Sonangol, and Mauritania. It’s a billion-dollar investment. In Angola, we are going to use some of the green electricity produced from existing hydropower plants to generate hydrogen which will be converted to Anmonia. It is going to be exported.
We will be doing this production from Angola and other producing countries because there is an urgent need for energy in Europe as we have much less Anmonia now following the Russia-Ukraine war that interrupted gas supply in Europe. We believe this could be a very good business.
In our partnership with Sonangol, we have a joint venture partnership that involves two German developers.
Beyond Angola, we have done many businesses in other African countries.
Our second big hydrogen project is in Mauritania.
We have also been involved in renewable energy projects across the African continent.
TER: What are the challenges your company encountered in investing in these projects in Africa?
Leibing: The main challenge for renewable energy projects is that if you produce electricity for local consumption, it isn’t easy to get financing for it.
European banks will only give you funds if you have long-term offtake agreements with creditworthy and financially strong institutions and many governments and energy utilities are in financially difficult situations which have become worse following the COVID-19 crisis.
This is also because of higher debt ratios in African government budgets which has made it more complicated and challenging than before to finance some of these projects.
However, one of the short-term solutions is to finance projects that are earmarked for export. As soon as we can produce green electricity and transform it to hydrogen for export purposes with strong international off-takers, it’s a lot easier to make these projects bankable.
In this case, the strategy would be to create revenues for the African governments by implementing export projects. And, then, it will make them improve their ratings and enable them to finance more domestic energy projects.
TER: What would you suggest the African government and private must do to attract more German investors?
Leibing: Firstly, the African governments need to know that they are in global competition, especially on the framework for investment.
In Germany, we receive delegations from several countries coming to our country to advocate for more investment.
If the projects are equally attractive, German investors will possibly prioritize those countries that offer the best legal framework and no corruption.
There are also lots of projects that make sense from an African perspective, but, it doesn’t have any economic value from German perspectives. This is because financing has become very difficult coupled with the rigorous European banking regulations, it becomes more complicated for European banks to finance any of these projects even though they make a lot of sense for African countries.
There is more work to be done on the German and African sides in developing the business framework right.
TER: In one of your recent posts via LinkedIn, you mentioned that Germany’s interest in buying LNG and exporting hydrogen from Nigeria isn’t realistic for now. Please could you provide more analyses on why you think this business may not work out; and, as an investor, what business model would you recommend between Germany and Nigeria/Africa in expanding their bilateral relations on gas, and LNG deliverables?
Leibing: The problem is mainly on the German side. Germany doesn’t have any international oil majors such as BP, or TotalEnergies.
We only have utility companies for distribution of gas and they are very conservative in doing business. Many of these German utility companies aren’t strong enough in terms of their balance sheet to sign long-term LNG offtake contracts.
We have tried it several times and nothing has happened so far.
The German government has also tried it with Qatar, and there is no single contract signed with Qatar. That is why I don’t think what the German Chancellor, Olaf Scholz said during his visit to Nigeria about Germany’s interest in importing Nigerian gas is going to happen because it is the private sector that will sign the agreements.
The main difficulty is that the German private sector because of its structure and the restrictions that energy utilities have, can not necessarily take as much risk in long-term LNG contracts and upstream gas investment as would be required on the Nigerian side.
However, it is a good idea for Germany and Nigeria to work together on LNG supplies. But, it is only going to work if the German government plays an active role in terms of providing guarantees for long-term offtake contracts. If the government doesn’t provide a guarantee, I don’t think it is going to happen.
To further increase confidence, there is a need to prove the concept by demonstrating joint success stories. Of course, dialogue is important. The Chancellor visited Nigeria recently and President Tinubu has participated in the Compact with Africa Summit in Berlin.
If Germany needs better security of supply, the German Government is required to provide a guarantee for such contracts and investment. The difficulty is that security of supply does not have a market price. That is why Government involvement might be required.
It would be good if the German Government supports the private sector investors who might not always be able to take on all risks themselves. So guarantees for bank loans would certainly be a good instrument to accelerate the development of this LNG supply.
On the hydrogen side, the German government is traveling around the world to discuss bilateral relations with other countries to import hydrogen to Germany. This is a good idea.
Exporting hydrogen from these countries including Nigeria will depend on the price of electricity for which green electricity can be generated and the German private sector will likely buy where this electricity can be generated cheapest. Unfortunately, at this stage, there are a few other African countries that offer better generation costs for wind and solar power than Nigeria does.
TER: Looking forward to the next 5 – 10 years, what are Conjuncta’s plans for Africa?
Leibing: We expect to further increase our footprint on the continent, to contribute to industrialization by providing efficient and sustainable infrastructure and we hope that in five years from now, we will export green hydrogen and contribute to the stabilization of revenue flows to Africa even in a post-oil period.
