By THE AFRICA BAZAAR Staff Writer
The race is on at full speed as U.S. investors sprint to “Power Africa.”
Since a little over five months ago when President Obama announced during his visit to Africa that his administration plans to provide $7 billion to help improve electricity in Africa, the list of participants racing to bring and increase access to clean and reliable electricity across the continent is growing.
Analysts said an estimated $14.7 billion deals have been signed by U.S. energy companies and energy focused private equity and asset management firms, including domestic and international companies since that announcement was made.
Adding its name to that list is American Capital Energy & Infrastructure, which is investing $130 million in Azura Power Holdings Ltd. to help develop a power project in Edo, Nigeria.
The funds will be used for the development of the first and second phases of Azura-Edo power project—a proposed 450MW open cycle gas turbine power station being developed near Benin City in Edo State, located in the southern area of the country, pursue its greenfield development pipeline and future acquisitions, expand its team and grow its construction and operational capabilities.
“In line with our Power Africa efforts, ACEI is investing in the leading independent power producer platform in this key African market,” said Lisa Pinsley, ACEI Director of Africa Investments. “The development of Nigeria’s electricity supply industry is a vast undertaking that requires a long term commitment. Azura is, and will continue to be, a key driver in this growth in capacity.”
ACEI, a part of American Capital, Ltd.’s asset management affiliate American Capital Asset Management LLC, is hoping its investment will accelerate Azura’s drive to create a flagship, multi-asset, power generation company and exert a transformative impact on its business.
The project, which represents the first phase of a 1,000MW power plant facility, is expected to have a positive impact on the industrial and social well-being of the area, leading to further economic development and job creation.
“We are extremely pleased to announce our investment in Azura, a good example of the type of investment in high growth platforms in the energy infrastructure space that we are targeting. Our investment is in recognition of the significant progress made by the Azura co-founders on the first phase of the Azura-Edo power project, the growth opportunities in the Nigerian and West African markets, and our confidence in the Federal Government of Nigeria’s power sector reform program,” said Paul Hanrahan, CEO and co-founder of ACEI.
Earlier this year, Azura, a power-development company owned by investment firm Amaya Capital Partners created to focus on the development, construction, acquisition and operation of large scale power-generation facilities in Nigeria and over time West Africa, signed a power purchase agreement with Nigerian Bulk Electricity Trading Plc, a result of Nigeria’s energy reform.
Nigeria’s economy, one of sub-Saharan Africa fastest growing economies, supported by robust performances in agriculture, services, and trade, has continued to perform strongly this year.
According to the International Monetary Fund’s latest data, Nigeria’s GDP grew by 6.8 percent in the third quarter, compared to 2012. Inflation has declined to 7.8 percent at the end September from 12 percent at end of 2012, in part owing to monetary policy implemented by the Central Bank of Nigeria and lower food prices. GDP is projected to increase to about 7 percent in 2014, while inflation should remain subdued in the single digits.
The country’s exchange rate has been stable, and the banking sector is well capitalized with low levels of non-performing loans.
However, as Africa’s most populous country with a current population of over 170 million, one of the highest growth rates and the seventh-largest in the world, Nigeria’s expanding economy suffers from a lack of power infrastructure due to years of mismanagements, which have adversely impacted job creation, crippling the growth of productive and commercial industries.
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 40,000MW to meet the demand. To meet that demands, Nigeria will have to invest across value-chain investments of at least $ 3.5 billion annually.
To address the deleterious effect on the social psyche of its population, which literally is living in darkness in the 21st century, the Nigeria government established Nigerian power sector reform in 2005, created to privatize the public power sector. The program has gone into effect last year, following the implementation of tariff and regulations standards.
Nigeria government is among other African governments, including Ethiopia, Ghana, Kenya, Liberia, and Tanzania that have signed-on to the Power Africa initiative- the U. S. government initiative launched by President Obama to focus on supporting economic growth and development in Africa by increasing clean and reliable access to electrical power, to accelerate and spur investments in the continent.
The program is also supported by domestic and international private-sector partners such as ACEI.
Amaya, established in 2009 as a principal investment firm focused on energy-related projects in West Africa, does not act like a typical private equity fund which manages third-party funds. Instead, the company invests as a principal from an early development stage of a project and has interests in the gas and power sectors in Nigeria.
The company said it is actively pursuing other energy infrastructure investments in the West, East and Southern African regions and expects over the next four years to invest $800 million to originate, develop, finance and operate regional power assets.
The first phase of the plant, which is expected to reach a financial closing in early 2014 and come on stream between 2016 and 2017, is forecast to create over 1,000 direct jobs during its construction and operation.