US-backed scheme lines up investors for African energy projects

Out-Law News | 05 Jun 2014 | 2:36 pm | 2 min. read

Plans to encourage more than $1 billion in investments for innovative energy infrastructure projects in sub-Saharan Africa have been announced by US energy secretary Ernest Moniz.

Moniz told a two-day ministerial-level meeting to discuss energy and business opportunities in Ethiopia which 27 private sector investors and organisations had already committed to developing, including “off-grid and small scale” energy projects under the ‘Beyond the Grid’ scheme.

Moniz said the scheme will “exceed” commitments to provide 20 million businesses and homes with access to electricity which were made under the existing ‘Power Africa’ initiative, launched by US president Barack Obama in South Africa last year.

Over an initial five year period the new scheme is designed to make it easier to acquire financial and technical assistance, which Moniz said was “historically not available to small energy businesses”. According to Moniz, the scheme “will incorporate new financial tools, such as investment structures that blend donor and private capital, aggregating and de-risking small energy projects in Africa and making them available as a new asset class for investment at scale”.

Moniz said: “With close to 600 million people without access to modern-day electricity, it is clear that centralised grid access is not a comprehensive solution for these countries in one of the world’s least urban continents. But through solutions including off-grid and small scale energy projects, we can bring electricity to these rural areas.”

In support of Beyond the Grid, the US African Development Foundation, GE Africa and the United States Agency for International Development have announced that they will jointly award up to $1.8 million in grant funding over the coming months to “African-managed and –owned enterprises with renewable energy solutions”.

According to the US energy department (DOE), Power Africa “has already helped close almost 2,800 megawatts (MW) worth of transactions and has secured commitments for another 5,000 MW”. The DOE said this represented nearly 75% of the initial goal of developing projects to make an additional 10,000 MW of “cleaner, more reliable energy” available in Ethiopia, Ghana, Kenya, Liberia, Nigeria and Tanzania. To date, Power Africa has attracted investments of more than $15bn from the private sector for new projects in sub-Saharan Africa including “mini” electricity generating plants, the DOE said.

The US government has been stepping up efforts to increase trade with Africa and encourage US firms and institutions to invest in the continent’s infrastructure.

The chairman and president of the Export-Import Bank of the US, Fred Hochberg, joined Moniz at this week’s Ethiopia conference. Hochberg said the bank intends to be a “full partner” in Africa. Earlier this year, the bank announced the appointment of 11 members to its 2014 sub-Saharan Africa advisory committee, to advise on the development and implementation of policies and programmes to support the bank’s activities in the region and boost US exports.

Last month, US commerce secretary Penny Pritzker concluded a trade mission to Africa to increase bilateral trade and investment in the energy sectors of Ghana, Nigeria and Ethiopia. Twenty US businesses took part in the DOC trade mission, which focused on investment opportunities in the energy sector.

The International Monetary Fund’s (IMF) Regional Economic Outlook for Sub Saharan Africa, released last April, said economic activity in the region continued to be underpinned by large investments in infrastructure, mining and maturing investments.

However, the report said: “Pervasive energy subsidies have discouraged investment and maintenance in the energy sector in many countries in sub-Saharan Africa, leading to costly and inadequate energy supply that is increasingly a bottleneck for economic growth.” The report also called on countries in the region to reform energy subsidies, which it said “discourage investment in the energy sector”.

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