African Infrastructure Deals Driven by International Energy Goals – August 2015

by Amanda Novello

  • 14 Aug 2015
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It is estimated that Africa suffers from a $900bn infrastructure deficit, characterized by chronic energy shortages and a lack of financial resources dedicated to economic and social infrastructure. The international community has responded by supporting the continent’s development through financial assistance. International banks, including the newly formed Asian Infrastructure Investment Bank (AIIB), along with trading initiatives such as the Africa-EU Energy Partnership, have announced ambitious goals for African development, particularly within the energy sector. Preqin’s Infrastructure Online service features information on 156 completed infrastructure deals taking place within Africa since 2009, with an estimated aggregate value of $77bn.

In Q3 2010, the Africa-EU Energy Partnership established a 520 MW renewable energy capacity target for 2020, serving as a catalyst for investment in renewable projects within Africa. As seen in the chart above, the proportion of transactions taking place within the renewable energy industry has surpassed all other sectors each year since 2011, representing 47% of all African infrastructure deals during this time. However, this is not spread evenly across the continent, with pockets of growth appearing in specific regions as a result of each country’s unique energy goals and the availability of natural resources. 

Eighty-five percent of African renewable energy transactions are for assets at the greenfield stage of development, highlighting the lack of established infrastructure projects on the continent. In May 2013, the Development Bank of Southern Africa partnered with Google, the Public Investment Corporation and SolarReserve, to fund the Jasper Solar Park in South Africa. This marked Google’s first major investment in African renewables, and is one of the largest solar installations in Africa. One year later, Abengoa and the Industrial Development Corporation provided $860mn to fund the 100 MW KaXu Solar Power Plant in South Africa, which was constructed to power over 90,000 homes. As part of President Obama’s Power Africa initiative, a plan launched in mid-2013 to double access to power in sub-Saharan Africa, the Overseas Private Investment Corporation (OPIC) recently provided $233mn to finance the 100 MW Kipeto Wind Power Project in Kenya.

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