Norfund, CDC eye 5,000MW Africa power partnership

The DFIs will take direct ownership of Globeleq, currently owned by Actis Fund II, to help plug a funding gap at the early stage of project development.

Norfund, the Norwegian investment fund for developing countries, and CDC, the development arm of the UK government, have announced a joint initiative that will aim to add at least 5,000 megawatts (MW) to Africa’s power generating capacity over the next 10 years.

The partnership will see Norfund acquire a large minority stake in electricity company Globeleq Africa from Actis Infrastructure Fund II, a vehicle managed by London-headquartered private equity firm Actis, for $225 million. CDC, which already holds a major indirect investment in Globeleq Africa via the Actis fund, will sell a small part of it to Norfund and transfer its remaining majority stake into the new venture.

The transaction will result in the direct ownership of Globeleq by Norfund and CDC at 30 percent and 70 percent respectively. It remains subject to government and lender approval.

“Inadequate and unreliable power supply is a major constraint on economic and social development in sub-Saharan Africa. This investment establishes a platform for Norfund and CDC to expand power production in Africa, based on the combination of financial capacity, industrial expertise, local partnerships and collaboration with authorities,” said Kjell Roland, Norfund chief executive, in a statement.

Founded by CDC in 2002, Globeleq is an operating power business involved in developing power projects across sub-Saharan Africa. It runs eight major generating assets in Côte d’Ivoire, Cameroon, Kenya, South Africa and Tanzania with a total capacity of about 1.1 gigawatts.

The company will be used as a platform to alleviate what the new partners assess as a chronic shortage of capital and expertise at the early stage of electricity projects. “While capital is available for later stage development to construct power plants in Africa once plans and agreements are in place, it can take over five years for projects to reach this point and many projects fail,” the statement said.

The generation capacity of sub-Saharan Africa grew by a total of 6,000MW during the last decade – less than the 8,000MW created every month by China during the sole year of 2010, according to the US Energy Information Administration. According to Norfund and CDC, only 32 percent of the population of sub-Saharan Africa has access to electricity.

“Early stage development is the bottleneck and the market desperately needs a committed, credible, expert developer of scale with a long term investment horizon. Under DFI ownership, Norfund and CDC have a vision of Globeleq Africa where it will support the development of significant new generating capacity over the next decade,” said Diana Noble, chief executive of CDC.

Norfund, which owns direct and indirect stakes in more than 50 plants across emerging markets, has more than $700 million invested in the power sector. According to the statement, CDC has provided capital to more than a third of all utility-scale independent power producers projects in sub-Saharan Africa, excluding South Africa.