American Capital plugs $130m in Nigerian power

The firm’s ACEI division, currently on the road to raise $1bn, aims to deploy up to $800m on the African continent over the next four years.

American Capital Energy and Infrastructure (ACEI) has committed to invest up to $130 million in Azura Power Holdings, a Nigerian power plant developer.

The capital will be used to fund the first and second phases of the Azura-Edo power project, located in Edo State, South Nigeria. The proceeds will also help Azura build up its pipeline of greenfield projects, pursue future acquisitions, expand its team, and back the expansion of its construction and operational capabilities.

The Azura-Edo power project, a 450 megawatts (MW) gas-fired power station being developed near Benin City, represents the first phase of a 1,000 MW facility. It is expected to reach financial close in early 2014 and come on stream by 2017.

ACEI’s investment follows last April’s signing of a power purchase agreement between Azura and utility Nigerian Bulk Electricity Trading, now seen as a template for other project-financed independent power producers in the country. The transaction was singled out by President Goodluck Jonathan as critical to Nigeria’s power sector reform process, ACEI said in a statement.

Power shortages have long been a crucial bottleneck on Nigeria’s otherwise fast-growing economy, which by some accounts produces less grid electricity than the Republic of Ireland. The $2.5 billion privatisation process started at the end of September, which saw the government hand over ownership of 15 state-owned electricity companies to private investors, raising hopes that significant resources would soon be devoted to boosting supply in the 170 million-strong nation.

“Nigeria is the most populous country in Africa with one of the highest growth rates in the world,” said Lisa Pinsley, ACEI director of Africa investments, in a statement. “The United Nations estimates that Nigeria’s population will reach 230 million within the next 20 years, and the total grid-based power generation capacity must rise tenfold to 40,000 MW to meet the demand.”

In June 2013, the firm joined Power Africa, an initiative launched by US President Barack Obama to boost economic growth and development on the continent by increasing reliable access to power. The programme aims at facilitating investments by member governments and their private sector partners, and ACEI hopes to participate in €800 million worth of such projects over the next four years.

Launched in 2012, ACEI is known to be halfway to raising its fund, the target for which is understood to stand between $750 million and $1 billion. It is a subsidiary of American Capital, a Nasdaq-listed private equity firm.