CDC targets ‘toughest markets’ with $1bn Africa power JV

The UK development-focused investor will deploy about $140m of equity in the platform, seeded with the Aga Khan Fund’s existing assets in East Africa.

CDC Group, a development arm of the UK government, has launched a joint power platform with Industrial Promotion Services, the industrial and infrastructure development unit of the Aga Khan Fund for Economic Development.

The institution will invest an initial $70 million of equity to establish the scheme, which will then receive another $140 million from both partners – 50.1 percent of which will come from IPS and 49.9 percent from CDC, Richard Charlton, an investment manager at the development financier, told Infrastructure Investor.

IPS, which generally looks for a technical partner in the markets where it operates, will make no exception in this case and ask the chosen company to commit another $140 million. CDC and IPS aim to then grow the platform to $1 billion using a classic project finance structure.

The platform fits into CDC’s motto, since 2012, of investing in “the toughest markets, the toughest operating environments”, Charlton said, which leads it to look for partners that can help it source deals and run assets in the regions where development finance can be most transformative.

The tie-up will start by housing IPS’s existing projects in Kenya and Uganda, and look for new projects in East Africa, as well as in Western Africa. These include the 147MW hydro Ruzizi III project in the Great Lakes region, Sub-Sahara first hydro scheme of more than 40MW.

The project is set to double Burundi’s current generating capacity and increase Rwanda’s capacity by 30 percent, CDC said. The partners also noted they intend to develop mini and off-grid facilities, an area Charlton noted IPS first explored in Tajikistan and Uganda.

He added that the tie-up is meant to be a “long-term” partnership, which he said was a “big differentiator” between CDC and a private equity fund. “These markets, especially if you’re doing new projects, they need a lot of time,” Charlton added.

“Three of the biggest projects closed in 2014-2015 – Azura, Turkana and Cenpower – took between seven and 11 years to get to financial close.”

He said the partnership was “open-ended in some ways”, meaning it could raise more money once its initial pot of financing is fully deployed.