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Bank’s $50m backing for African power sector ‘to create pool of energy investors’


The board of the African Development Bank (AfDB) has approved a $50 million investment to become an “anchor investor” in a multinational power company with bases in Nigeria and Zambia.

The AfDB said it is backing CEC Africa Investments Limited (CECA), which “seeks to acquire and develop distribution and transmission assets and complementary greenfield generation projects throughout sub-Saharan Africa.

CECA represents AfDB’s first equity investment into a power company with interests across Africa, the bank said. “The investment has been structured as part direct equity and part convertible debt, which demonstrates the ongoing financial innovation undertaken by the AfDB when it comes to supporting infrastructure development in Africa.”

Bank president Donald Kaberuka said: “By supporting an indigenous power developer, the bank is helping create a pool of pan-African investors besides assisting in mobilising the necessary capital to increase access to energy in Africa.”

The AfDB said its investment will help it “to shape CECA’s policies and strategies, while catalysing additional private sector funding into Africa’s power sector”. The move is in line with the bank’s 10-year strategy up to 2022, which aims “to promote infrastructure development, regional economic integration, private sector development, governance and accountability, as well as skills and technology development”.

The bank said: “By investing across the energy value chain (generation, transmission, and distribution), CECA aims to reduce electricity losses while improving the overall economics in Africa’s power sector.”

CECA has invested in two operating companies in Nigeria: the Abuja Electricity Distribution Company and North South Power, which holds a 30-year concession on the 600-megawatt Shiroro Hydro Power Plant, about 65 kilometres North-East of Minna, in the Niger State of Nigeria. CECA’s investments were the result of Nigeria’s privatisation of the country’s power sector.

In addition, CECA has a number of greenfield power projects “under active development in Southern and Western Africa, as well as a reserve pipeline spanning Eastern and Central Africa”, the AfDB said. Through these investments, “CECA aims to become one of Africa’s leading power utilities, thereby catalysing additional private sector participation in its energy markets”.

The AfDB said that CECA is targeting a capitalisation of $500m within the next three to five years to “deliver on its growth strategy”. To date, CECA has been capitalised with assets in excess of $100m by CEC Plc, which the bank said is a publicly-traded private utility with a 50-year history in Zambia and the Democratic Republic of Congo and which has “a consistent track record of profitability”.

A “number of other investors” have already been identified by CECA and it is expected that a first closing of $150m will be reached by the third quarter of 2015,” the bank said.

In Nigeria, the US-backed 'Power Africa' programme is supporting the development of the energy sector through credit enhancement, grants, technical assistance, and investment promotion.

According to the US Agency for International Development (US AID), as of early 2015 Nigeria’s federal government instructed the electricity market “to operate in accordance with established contracts”, including power purchase agreements for generators and ‘vesting contracts’, which allocate a percentage of the capacity and energy output from one or more generating companies to distribution companies.

US AID said: “Each market member will pay or receive according to what they receive from or supply to the system, a critical step to building investor confidence in the sector.”

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