A new partnership to boost power generation in Africa by adding at least 5 000 MW of generating capacity over the next ten years, was announced last month by Norwegian investment fund for developing countries Norfund, investor in private equity funds in Africa CDC and a UK development finance institution.
Through the partnership, Norfund will acquire a significant minority stake in power company Globeleq Africa from the Actis Infrastructure 2 Fund for a cash consideration of $225-million, subject to completion adjustments and including capital to further fund two expansion projects.
CDC, which already holds a major indirect investment in Globeleq Africa through the Actis fund, will concurrently sell a small part of its holding to Norfund and transfer its remaining majority stake into the new venture.
The agreement, which will result in direct ownership of Globeleq Africa by Norfund and CDC at 30% and 70% shareholdings respectively, is pending government and other third-party consents.
Under Norfund and CDC ownership, Globeleq will pursue early-stage and other development opportunities in power generation in Africa to alleviate the critical shortage of reliable electricity.
Globeleq Africa is an operating power company, actively developing energy projects across sub-Saharan Africa. It has eight major generating assets in Côte d’Ivoire, Cameroon, Kenya, South Africa and Tanzania with a total gross capacity of 1 095 MW.
The company develops electricity generating plants that support the continued development of the power sector in these regions and actively participates in the communities in which it operates.
CDC and Norfund will work with Globeleq Africa to help meet the demand for power across sub-Saharan Africa. Only 32% of the population in the region has access to electricity and progress is slow.
For example, in the decade between 2001 and 2010, generation capacity in sub-Saharan Africa increased by a total of 6 000 MW, whereas in China, the total electricity capacity increased by 8 000 MW every month in 2010.
While capital is available for later-stage development to construct power plants in Africa once plans and agreements are in place, it can take over five years for projects to reach this point and many projects fail. Consequently, there is a shortage of investors and companies addressing the entire value chain of power project development, especially the early stage, and too few new power projects are coming online.
By addressing the bottleneck at early-stage development, Norfund and CDC aim to bring more projects to construction phase and expand access to reliable electricity in the region. If successful, the new strategy will result in over 5 000 MW of new generating capacity. New capacity of 1 000 MW alone is enough to support the development of over 20 000 businesses, which could provide over 800 000 salaried jobs.