July, 2013 - ZE DataWatch by ZE PowerGroup powered by ZEMA ...

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July 2013InDepthAt first glance it’s easy to see the very striking difference in2010 between the Total Electricity Net Consumption (BillionKilowatt-hours) for say those living in Northern America(4,599.601 billion KWs) compared to those living in Africa(559.593 billion KWs).What’s even more astonishing is when one considers that thelatest estimates by the United Nations for total populationsizes in each region stood at nearly 350 million in NorthernAmerica versus 1.046 billion in Africa. Look even closer andyou’ll soon realize that the higher consumption rates withinAfrica are clearly located in the northern, more affluentregion of the continent.Now consider the data for the total number of InstalledElectricity Capacity on the continent against the populationgrowth levels. Upon entering this data into the enterprisedata management software the ZEMA Suite and utilizingdifferent formulas to analyze the data, we can see two verydifferent stories emerge.Figure 2: Annual % Change for Installed Electricity Supply in Africavs Population Growth. Source: EIA. Graph created by ZEMA.For the past 20 years, annual population growth in Africa hasaveraged out at about 2.4%. The upward and downwardfluctuations of capacity change represented on the graph,which in 2001 experienced a significant drop of 8% in just oneyear, reveals a much more volatile situation. Understandingwhy these dramatic fluctuations occurred would require amore thorough examination of what was happening duringthese years. The graph does reveal that capacity change forthe past two decades has been unstable and perhaps throwscaution to wind for any future investor interested in enteringthe market.Despite these shortcomings, the potential in the region is stillmassive, or so at least according to Obama and his new‘Power Africa’ initiative.Figure 1: Total Installed Electricity Supply vs Total PopulationGrowth in Africa. Source: EIA. Graph created by ZEMA.Obama’s Power Africa InitiativeFigure 1 looks at the total amount of installed electricitysupply versus the total population growth in Africa. Althoughthe current rates of electrification on the continent areslower than population growth in parts, on the whole thepicture could be seen as being positive. Over the past decade,it would appear that the growth of installed electricity supplyhas been slightly lagging behind the growth in population.However, Figure 2, which looks at the percentage changedifference year-on-on, presents a much more volatilesituation.Whilst touring South Africa during his three-nation Africanvisit, Obama announced details of the Power Africa initiative,a partnership between the U.S., six African governments, andthe private sector. Over the next five years, the U.S. willspend $7 billion USD to enhance access to electricity inEthiopia, Ghana, Kenya, Liberia, Nigeria, and Tanzania. Themoney will come mostly from existing U.S. developmentbanks, so it doesn’t require new spending from Congress.With the initial set of six partner countries, Power Africa plansto add more than 10,000 MW of electricity generationcapacity on the continent; increasing electricity access to atleast 20 million new households and commercial entities.34 Back to Summary
July 2013InDepthIn a press statement, the White House announced:“Power Africa will build on Africa’s enormous power potential,including new discoveries of vast reserves of oil and gas, andthe potential to develop clean geothermal, hydro, wind, andsolar energy. It will help countries develop newly-discoveredresources responsibly, build out power generation andtransmission, and expand the reach of mini-grid and off-gridsolutions.”With billions being spent on infrastructure, the president isnow pushing for American companies to get in on theinitiative. General Electric Company was initially flagged asone of the biggest players to participate. The companycommitted to bringing online 5,000 megawatts of new,affordable energy through the provision of its technologies,expertise, and capital in Tanzania and Ghana.Billions have been committed from other private sectorpartners to support the development of more than 8,000 MWof new energy generation. The White House outlined thefollowing companies in its press statement:Heirs Holdings commits to $2.5 billion USD of investment andfinancing in energy, generating an additional 2,000 MW ofelectricity capacity over next five years.Symbion Power aims to invest $1.8 billion USD to support1,500 MW of new energy projects in Power Africa countriesover the next five years.Aldwych International commits to developing 400 MW ofwind power in Kenya and Tanzania – which will represent thefirst large-scale wind projects in each of these countries, andan associated investment of $1.1 billion USD.Harith General Partners commits to $70 million USD ininvestment for clean, wind energy in Kenya and $500 millionUSD across the African power sector via a new fund.Husk Power Systems will seek to complete installation of 200decentralized biomass-based mini power plants in Tanzania –providing affordable lighting for 60,000 households.The African Finance Corporation intends to invest $250 millionUSD in the power sectors of Ghana, Kenya and Nigeria,catalyzing $1 billion USD in investment in sub-Saharan Africaenergy projects.After it was announced that the African Development Bankand the African business fraternity had joined Obama’s PowerAfrica initiative, Standard Chartered bank also expressed aninterest in investing in the continent’s power sector.They say they are now ready to commit another $2 billionUSD for the financing of energy projects as part of theinitiative, more than 20% of the initial private sectorcontribution. In a statement the bank said it would use itsgeographic coverage across 37 African countries, workingclosely with U.S. agencies, to develop a policy framework thatfor specific projects and the introduction of best practice forinfrastructural development in the region.With the likelihood of more investors looking to get involvedin the Africa Power initiative, the Overseas PrivateInvestment Corporation (OPIC) and U.S. Agency forInternational Development (USAID) plans to jointly host anAfrican energy and infrastructure investment conference nextyear to assess their status. According to the online journalESI-Africa.com, it will bring together investors, developers,and companies with U.S. and African government officials todemonstrate the opportunities for investment and the toolsand resources available from the U.S. government and otherpartners to support investment.The Potential to Invest in Sub-SaharanAfricaThere’s no doubt that the potential to invest in the region isgreat.However, as this emerging industry still tries to find its feet,there certainly is a lot to be wary of. The regulatoryenvironment, for one, is certainly not as developed as it couldbe. As well, the lowly consumption levels mentioned earlierclearly demonstrate a lack of basic infrastructure in theregion.Energy subsidy reform in the region also continues to be along-standing policy challenge for the region. According tothe Regional Economic Outlook: Sub-Saharan Africa report bythe IMF, “pervasive energy subsidies have discouragedinvestment and maintenance in the energy sector in manycountries in sub-Saharan Africa, leading to costly andinadequate energy supply that is increasingly a bottleneck foreconomic growth.”Investors should not be deterred. Interested parties will justneed to ensure they do their research carefully beforeentering the market.And significant opportunities appear to be coming on-streamall the time. Just last month the Nigerian government35 Back to Summary
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July, 2013 - ZE DataWatch by ZE PowerGroup powered by ZEMA ...

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