Track: Business Analytics

Abstract

Adequate electricity supply in many African countries remains unaffordable, inaccessible and unreliable and this paper
therefore seeks to assess the value of public-private partnerships in closing this gap. The standard binomial lattice
model is extended to include the risk of government failure, as a key determinant of project value and partnership
success in developing countries and ultimately guides the investment decision and timing by prospective investors.
The results suggest that projects which would ordinarily be executed using traditional valuation methods and the
standard binomial model, are significantly affected by the inclusion of government risk as a constant factor of
uncertainty and consequently heightens the risk of investing in developing countries. The objective is to highlight
imperatives for potential investors, in relation to costs, benefits, and inherent uncertainties surrounding biopower and
related renewable energy investments, for enhanced energy access, economic and sustainable development of the
region.

Keywords
Real Options Valuation; Biopower; Africa; Waste; Energy