Out-Law News 2 min. read
09 Feb 2015, 10:00 am
Norfund, the Norwegian Investment Fund for Developing Countries, and CDC, the UK’s development finance institution, said that through their new partnership, Norfund will acquire a “significant minority” stake in Globeleq Africa from the Actis infrastructure 2 fund for a cash consideration of around $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 via the Actis fund, will “sell a small part of its holding to Norfund and transfer its remaining majority stake into the new venture”, the funds said.
The agreement, which will lead to the direct ownership of Globeleq Africa by Norfund and CDC with stakes of 30% and 70% respectively, was announced on 3 February and is subject to governmental and other approvals.
The funds said their partnership aims to tackle “bottlenecks” that can interrupt infrastructure projects in the early stages of development.
“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,” the funds said. “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.”
The funds said, if successful, their new partnership “will result in over 5,000 MW of new generating capacity... 1,000 MW alone is enough to support the development of over 20,000 businesses, which could provide over 800,000 salaried jobs”.
Under the ownership of the funds, “Globeleq will pursue early-stage and other development opportunities in power generation in Africa in order to alleviate the critical shortage of reliable electricity”.
Globeleq Africa, an operating power company that is developing energy projects across the SSA region, has “eight major generating assets” in Cote d’Ivoire, Cameroon, Kenya, South Africa and Tanzania with a total gross generating capacity of 1,095 MW, the funds said. “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,” the funds said.
According to the funds, only 32% of the population in the region has access to electricity, which is “roughly the same stage as the US in 1920 and UK in 1929 and progress is slow”. Between 2000 and 2010, generating capacity in SSA increased by a total of 6,000 MW, compared to China, where overall generating capacity “increased by 8,000 MW every month in 2010”, the funds said.
Norfund chief executive Kjell Roland said: “Inadequate and unreliable power supply is a major constraint on economic and social development in sub-Saharan Africa. This investment establishes a platform for Norfund and CDC to expand power production in Africa, based on the combination of financial capacity, industrial expertise, local partnerships and collaboration with authorities. This investment will expand Norfund’s presence in African power markets and widen our technology choice.”
According to latest figures from the Infrastructure Consortium for Africa (ICA), total infrastructure funding commitments in Africa increased for the second year running in 2013, with the energy, transport, water and information and communications technology sectors the key beneficiaries.
The ICA said in its annual report for 2013, commitments reported by its members, including the G8 nations, South Africa, African Development Bank, Development Bank of Southern Africa, European Commission, European Investment Bank and the World Bank Group, were up 35% compared with 2012, reaching a record level of $25.3 billion.
Last month, the Sustainable Energy Fund for Africa approved preparation grants for the development of a number of “solar-hybrid mini grids” in rural growth centres in Tanzania and to support the development of a 72 MW solar power plant project in Cameroon.
Other new initiatives include a new investment vehicle to fund energy projects in Africa, which has been launched by Dubai-based Access Power MEA and French renewable energy developer Eren Developpement.