Interview with Dennis Rach, Negotiation Support Advisor, CONNEX

Please describe the scope and objectives of Connex.

The G7 CONNEX Initiative supports partner governments in Africa, Asia, Latin America and the Caribbean in complex negotiation processes with international investors in the areas of mining, infrastructure and renewable energy (including hydrogen). Tailored towards a country’s demand, we provide international multidisciplinary experts to support and empower national negotiation teams. Our short-term, multidisciplinary advisory services include legal, fiscal, geological, social/community development, environmental and technical or strategic expertise. CONNEX support allows governments, despite insufficient experience and capacities, to reach better contractual agreements and thus leverage the developmental impact of large-volume extractive resource, infrastructure and renewable energy projects. CONNEX's multidisciplinary support services enable the risks to large investment projects to be identified and addressed early in the negotiations.

Our mission is to empower governments to conclude better investment agreements. Our vision is that future generations will understand and back the investment agreements that governments sign. The overriding aspect of CONNEX’s work is that we are demand oriented. We serve governments when they want and at their own pace. Their ownership is at the center. Since 2017, we have supported governments of 20 countries in 30 projects to conclude a better contract.

What is your role in Connex?

I am a Negotiation Support Specialist at CONNEX, managing and facilitating our negotiation support to partner governments.

 

Please describe your career background and career highlights from Connex.

It is always a highlight for me to see how committed and motivated partner countries deal with large investment projects and do their utmost to strengthen their benefit for their country, their economy and their citizens. Each country’s circumstances differ significantly. Each of our negotiation support activities has its own character and peculiarities. For me, it is very meaningful to be able to accompany our partners on their journey with their projects for more local participation and sustainable extraction of mineral resources, working towards energy transition or realizing sustainable infrastructure solutions.

 

What are you currently working on? What is your current focus?

CONNEX is currently providing expert teams to many partner governments around the world on important investment projects.

In Latin America, CONNEX is supporting governments in the technical evaluation of mine closure plans and the negotiation of financial guarantees, to facilitate socially and environmentally responsible mine closures.

In the Caribbean, we are supporting a government in the tendering and negotiation of a renewable energy project with which the country wants to renounce fossil fuel-based energy production. Together with the government, our experts identify important issues and risk which need to be proactively managed to have a successful tendering process. In West Africa, we are providing legal and financial analysis expertise to assist in the negotiation of a hydrogen project. We are witnessing the increasing importance of negotiation support in this sector as it currently lacks sufficient regulations and standards are set in state-investor negotiations.

In Central Africa, our financial and infrastructure experts are supporting the review of a feasibility study of a large-scale transport infrastructure project. In doing so, we are enabling the government to make informed decisions in regard to the project’s further development and the ongoing engagement with the investor.

Furthermore, our experts are verifying geological deposits for a partner government in Southeast Asia in the preparation of an international tender for a copper project. We don’t have a particular focus, preferring to stay flexible given the sector and the particular project and its requirements. We are working demand driven according to the needs and priorities of our partner governments. That makes our work very rich in variety.

 

What is in the pipeline of projects/contracts for Connex? Please provide links to any identified opportunities, relevant reports and business plans.

As we are demand-oriented, it is difficult to foretell the future. We are ready to work with governments to help them negotiate better agreements. All three sectors – mining, infrastructure and renewable energy – are receiving considerable attention at very senior levels.

 

What are the current challenges faced by Connex and the governments you support?

We experience the enormous challenges that partner governments face when preparing and conducting contract negotiations with international investors.

First, many governments lack the capacity and staff to deal with the complexity of large investment projects (e.g. PPPs). As a result, in practice, many governments are unable to meet their own requirements (in PPP frameworks and sectoral policies) when implementing such projects.

Second, governments are often unable to meet international best practices or sustainability criteria and standards. This is simply because they lack the experience and knowledge of how to transfer the criteria and standards and apply them in a specific project context. In the end, the results often fall far short of the public's expectations and below what is practically feasible.

Third, in some countries, the population is mobilizing strong opposition to mining and infrastructure projects. Many governments have difficulties in adequately addressing the concerns and needs of affected communities and the local population. Oftentimes, they do not participate in decision-making and negotiation processes. Agreements, negotiated between governments and investors thus may lack support of those who are most affected. Lastly, the complexity involved in the governance of large investment projects can demand more financial and human resources from a government than it has available. These circumstances are compounded by the public and political attention that many of these investment projects enjoy.

Unfortunately, this can lead to governments preferring to sign poorly negotiated/imperfect agreements out of necessity rather than not signing investment agreements at all.

 

In the context of climate and sustainability, what is your focus and what measures are you supporting Governments taking towards the achievement of their Nationally Determined Contributions (NDCs)?

Many partner countries are only beginning the process of harmonizing their environmental and climate policy (self-)commitments with concrete projects. CONNEX supports partner governments in integrating and harmonizing sustainability, environmental and climate policy requirements and voluntary commitments with investment agreements. There is often a disconnect between what one ministry (foreign affairs for example) says regarding its NDCs and other ministries (finance and mining ministries) do in practice.

In Latin America, we see a great interest on the part of partner governments to work towards a responsible closure of mines and also an increased desire to operate ongoing mining projects with renewable energy. We also observe that many governments want to become less dependent on fossil fuels and are working on a just energy transition. Here, too, we support our partners in tendering and negotiating renewable energy projects to diversify and green up their energy supply.

 

What types of legislative reform would assist the projects and Governments which you are supporting?

We, as CONNEX, are not involved in any legislative reform. Yet, CONNEX often operates in contexts where strong legislative frameworks are not always in place. These places are characterized by legal uncertainty and state-investor agreements become all the more important. Experiences and results achieved through CONNEX support in such negotiations are often incorporated by governments into the development of new or amendment to existing legislative frameworks. A good example is the hydrogen sector. The sector is still quite new, and developments are dynamic. Many places lack the appropriate legal frameworks for the development of mutual beneficial investment projects. In this context of legal uncertainty, experience gained through CONNEX support can also feed into legislative processes and reforms. A further example is Latin America, where CONNEX support in mine closure processes is being fed into the development of a new national legislation on mine closure. The first of its kind in the country.