invest in africa

Financing Africa’s large scale power requirements

By Idéle Esterhuizen

Financing large capital-investment requirements would be the biggest challenge facing Africa’s power sector going forward, especially the need to increase private sector funding and cashflow by seven- to ten-fold their current levels.

Speaking during a panel discussion at the 2013 Africa Energy Indaba, in Sandton, independent power producer (IPP) Cennergi advisor Demetri Pappadopoulos told delegates that the successful funding of power projects on the continent required a practical approach.

“We need to get down to business. Africa is different to the rest of the world. Each of its countries have their own needs. To make funding effective, we need to learn from other businesses in the continent’s energy sector.

“Projects in Africa must be made bankable; we need to accept the risks of operating on the continent and tailor solutions for this,” Pappadopoulos stated.

The recent Africa Energy Outlook 2040 study conducted in 2011 concluded that an estimated $43.6-billion a year would be required to meet forecast energy demand for Africa up to 2040. An investment of $42-billion a year up to 2030, was needed in the power sector, compared with the current investment that was less than a quarter of this amount.

An upfront investment of $5.4-billion a year would be required for transmission infrastructure to meet forecast demand prior to 2025 and $3.7-billion a year would have to be made available to increase the access rate to energy in all African countries to a minimum of 60% by 2040.

Pappadopoulos further indicated that many opportunities to fund smaller renewable-energy projects, such as transmission projects, in South Africa, were being missed, as banks and other financiers were chasing projects in excess of 20 MW.

“A small IPP programme is essential in South Africa. There is room for this, as many companies might not be able to develop a large project, but would have the capacity to take on a smaller project,” he indicated.

Industrial Development Corporation green industries head Rentia van Tonder noted that the comfortable environment government’s IPP programme was creating for financiers in terms of its focus on larger-scale renewable energy projects, contributed to the problem.

In December, the Department of Energy postponed the third bid window submission deadline for it renewable-energy procurement programme from May 7 to August 19, to incorporate lessons from the first two bid windows.

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