Africa infrastructure fund tops $54m in commitments

African Energy Infrastructure Fund is now more than half-way toward its first close, which is expected in the middle of the year, and has already lined up its first deal in Ghana. In December 2008, it received a $30m equity commitment from the African Development Bank.

The African Energy Infrastructure Fund (AEIF) has topped $54 million in commitments, one of the fund’s senior executives told InfrastructureInvestor.

Jonathan Berman, a Johannesburg, South Africa-based managing director at Fieldstone, the fund’s co-sponsor, said that AEIF is targeting a first close on about $100 million toward the middle of the year. Its eventual target is $500 million.

AEIF is a Sub-Saharan Africa energy private equity fund focused on power and energy infrastructure projects. It was launched last year by Prescient Fieldstone Investment Management, a joint venture between investment manager Prescient and financial advisory firm Fieldstone Africa.

People invest in infrastructure because it is low risk . . . it is hard to sell 'low risk' and 'Africa' in one sentence, to be frank.

Jonathan Berman

Prescient and Fieldstone have each committed to the fund, along with Metropolitan Asset Management of South Africa and one other South Africa-based asset manager whom he cannot yet disclose.

In December 2008, the fund received a $30 million equity commitment from the African Development Bank.

Fieldstone, which focuses on infrastructure and energy financial advisory, has already lined up the first deal for the fund: TOPL, a conventional gas turbine power plant being developed in Ghana by GECAD, a General Electric affiliate. Fieldstone is acting as a financial advisor on the project.

AEIF will focus on investments like TOPL, where it will take a minority position alongside Fieldstone advisory clients, Berman said.

Asked about the fundraising climate in Africa, Berman said that there is capital available, but the bigger challenge is getting investors to understand the asset class.

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“People invest in infrastructure because it is low risk and while we think it is one of the lowest risk investments in Africa, it is hard to sell ‘low risk’ and ‘Africa’ in one sentence, to be frank,” Berman said.

Infrastructure investments in Africa exact a premium, he said, but the size of the premium varies greatly by country.

“It could be anything from 2 percent for equity in regulated infrastructure as opposed to government debt in some countries, in others it could be as high as 7 to 10 percent,” Berman said.

He believes there is wider understanding of the need for investment in Africa’s power infrastructure, which he called “a key bottleneck to African development and growth”.

“In South Africa, there are 45 million people and we have two-thirds of Sub-Saharan power generation capacity,” Berman said. “There are 800 or 900 million people in the region. That’s a pretty stark difference,” he added.