Changing Africa from a dark continent to a bright continent

According to Ask.com contrary to what people might think, the name ‘Dark Continent’ was not given to Africa because of the colour of the people living there, but because of the mystery that surrounded the place back when the Europeans first visited there. Africa is the world’s second largest and second most populous continent. At about 30.2 million kilometer square including adjacent islands it covers six percent of the earth’s total surface. However, seen from space, Africa at night is said to be very dark and unlit, which probably gives the name dark continent a new meaning. Africa’s power sector is woefully behind the rest of the world, with energy consumption per capita only one percent of that of high income countries. The continent is believed to generate only 4percent of global electricity. According to the Energy Information Administration, in West Africa only about 30% of the total population of approximately 250 Million has access to electricity, with almost 70% of the people in the sub region literally in darkness. In sharp contrast, the sub region is home to significant energy resources namely oil, natural gas, coal and hydroelectric power. Although adequate energy supply resources are available, there are significant technical and financial challenges in harnessing and sustaining electricity delivery to end-users. To help change and improve on the power shortage situation on the sub continent, the International Quality and Productivity Centre (IQPC) organized a Power and Electricity West Africa conference in Accra, Ghana, bringing together West Africa’s power sector leaders to deliberate and find solutions to the numerous challenges facing the West Africa power sector such as how to access funding, inside knowledge on projected power demand, a closer look at upcoming projects, opportunities for involvement in development of local generators, blueprints for increased implementation of clean technology and sustainability. This event was the first of its kind in the region - bringing local, regional and international minds to map a strategic road going forward. Speaking on the topic: Commercial opportunities in gas and LNG fired power generation, Oliver Andrews of the African Finance Corporation, indicated that 7000MW of new generation capacity is required in Africa each year to meet suppressed demand and projected economic growth. With US$26bn required for new capacity. West Africa requires additional capacity of 10,000MW to meet its power demand by 2020. Since 2007, over 30 IPPs have been licensed to produce power in West Africa but not with much success. West Africa accounts for 30% of Africa’s gas reserves: Nigeria (180tcf), Ivory Coast (1tcf), Ghana (840bcf) and Benin (40bcf). New generation capacity are likely to be driven by thermal (natural gas generation), especially with the completion of the West Africa Gas Pipeline (WAGP). Natural gas already accounts for 45% of generation capacity in West Africa. Electricity demand in the sub-region currently outstrips supply. Meanwhile strong growth in demand is being experienced. Access to electricity unacceptably low and if improved as expected, will exacerbate the demand and supply imbalance. “Countries in the region should ensure implementation of efficient pricing policies critical to sustainability of power investments, operation and maintenance. Promote innovative financing arrangements with private – public partnership, and competitive pricing and clear policy guidelines key to unleashing available commercial opportunities in LNG and gas to power market in West Africa,” he recommended. Energy Financing In Africa To Janos Bonta and Aart Muller, both from the Netherlands Development Finance Corporation, the energy crisis in Sub-Sahara Africa presents an enormous potential of the energy market in the region. There is a huge potential for all types of energy, as the continent has abundance of all types of natural resources. Hydro’s, wind, geothermal and solar can all contribute to the continent’s energy mix. Gas-fired power plant potential is especially large, because of exploration and exploitation of large off-shore gas reserves currently on-going and planned for the short term. As many African governments do not have the money to invest all needed for power generation and transmission themselves, a lot needs to be done by independent power producers (IPPs). However, many countries still need to implement regulatory reforms to allow IPPs to enter the market. In sub-Sahara Africa, countries like Kenya, Uganda, South Africa, Tanzania, Ghana and Ivory Coast do have the regulatory framework to create room for IPPs in place. Extensive renewable energy regulation for the private sector has also been set up in South Africa, leading to the development of many wind- and solar projects. A problem remains the low tariffs for end-users of electricity, which are not cost reflective. There exists a lot of resistance against the increase of electricity prices, from both governments and civil society. Key Element For Successful Energy Financing Committed and experienced (strategic) investor, with proven track-record, putting sufficient equity at risk and providing project completion risk support; clear regulatory framework, ensuring fair treatment of IPPs, providing for strong long-term PPA from creditworthy utility or client; cost-competitiveness of power generation, leading to affordable least-cost energy solutions; financial sustainability with minimum DSCRs, also in stress scenarios; environmental and social compliance with the highest international standards. IFC Performance Standards will apply; risks assessment by best-of-class independent advisors (legal, technical, insurance, E&S, financial model); project and finance documents to comply with international standards. Loan documentation in English or NY Law; experienced and strong EPC and O&M Contractors. Warranties and long-term service contracts should be in place and fuel supply, where applicable, secured by long-term contracts.