CDC invests in African power plants

UK government-owned private equity investor CDC Group has acquired two power assets from AES in a $329m transaction.

UK public sector emerging markets investor, CDC Group, through its CDC Globeleq power subsidiary, has agreed to acquire two electricity generation assets in Africa from global power project developer AES Corporation in a deal worth $329m.

The deal is Globeleq’s second investment since launch earlier this year, following its acquisition of Entergy Corp’s stakes in three power businesses in Latin America in March.

Under the deal, CDC Globeleq will be investing a total of $116m of equity into Songas, a gas-to-electricity company that is currently being constructed in Tanzania, and Kelvin, a 600 megawatt coal-fired power station serving the city of Johannesburg in South Africa. CDC Globeleq, which was established by CDC Group in the summer, will also acquire $178m and $35m of debt held by these companies respectively. The transaction is expected to close at the beginning of 2003.

AES, which has interests in around power 180 plants worldwide, decided to sell the two businesses in an effort to raise cash to help pay off debt. Globeleq first approached AES with the idea of a deal in the first quarter of 2002, but the Virginia-based firm was not interested in selling the assets at that stage. Following a change of chief executive in May, Globeleq re-established contact with AES and negotiations were underway in August.

According to Paul Kunert, regional manager with responsibility for Africa at Globeleq, the company is looking to bring in co-investors to finance the deal. “We are looking to bring additional funds into the business, whether in the form of equity or debt. This could be at a project company level or at a regional level,” he explained.

Kunert said the firm has plans to make two more investments of similar size in the next twelve months, but would not be drawn on details regarding the forthcoming deals.

CDC is 100 per cent owned by the UK government through its Department for International Development. The fund provides equity capital for commercially sustainable business ventures in emerging markets. CDC invests in the consumer businesses, financial institutions, healthcare industries, energy industries, transport industries, and telecommunication sectors in Latin America, Africa, South Asia, and Asia Pacific.

In summer 2002, the firm took a strategic step to set up CDC Globeleq as its branded international power business with $300m in assets. CDC Globeleq, which at inception was given $300m for new investment, currently holds investments in 21 power assets in 15 developing countries, with a total generating capacity of 1200 megawatt, based on equity share. Including the AES assets, generating capacity will be at 1900 megawatt.