Investors combine to create pan-African energy group

Infrastructure backers will pool assets to launch company with power to supply 30m people

Infrastructure investors have launched a $3.3bn joint venture to create one of the biggest pan-African energy companies, as the private sector increasingly looks beyond individual projects to tackle the continent’s power shortages.

The Africa Finance Corporation, a Lagos-based development institution, and an infrastructure fund run by South Africa’s Harith General Partners will pool assets including a Kenyan wind farm and a Ghanaian thermal power plant in the venture, they said on Wednesday.

The partnership underlines increasing efforts by private investors to combine portfolios of African plants and grids across several countries, both to make them more financially flexible and in response to the scale of the region’s power deficit as cities and populations expand.

Africa below the Sahara — including South Africa’s industrialised economy, with the lion’s share of the region’s installed electricity capacity at about 48,000 megawatts — generates less power than Spain.

The 30 countries with the least power have an average capacity of 200 megawatts each.

The merged company’s more than 1,500 megawatts of capacity either installed or under construction, supplying about 30m people, would make it the continent’s seventh biggest electricity generator if it was a country.

The aim of the joint venture is to create “an African power company with its own balance sheet and its own assets,” able to attract faster financing than normal, Andrew Alli, chief executive of the AFC, said.

“For the last few decades the private sector has approached the problem on a project by project basis,” Mr Alli said.

“But when you fund on a project-finance basis, it gets very complicated,” with several lenders and providers of equity involved in each deal, he added.

Project financing for a big power plant can take up to two or three years to arrange, whereas the merged company could seek to raise money for new assets within months by tapping bond markets.

Tshepo Mahloele, Harith’s chief executive, said that the long-term horizon involved in building some assets also “does not fit well with a pure private equity fund model” where investors typically seek to exit in a few years.

Combining assets into a common vehicle would also make them “more resilient against disruption” with utilities increasingly focused on sending small amounts of power to individual consumers, Mr Mahloele added.

The merged company’s portfolio would include the Lake Turkana wind farm in Kenya, owned by Harith’s fund, and Cenpower, an AFC-backed owner of the Kpone thermal project in Ghana. A third of the assets are renewable.

“An African-owned, African-located, and African-operated company would also add value to the continent”, including by helping to develop a cadre of people with expertise in power infrastructure, Mr Alli said.

Source: https://next.ft.com