Erik is addressing the upcoming EAPIC conference track on IPPs, entitled: “How are IPPs viewing the financing of future projects?”
1) Let’s start with some background on Harith General Partners and projects that you are involved in in East Africa?
Established in 200, Harith General Partners is the leading Pan-African fund manager for infrastructure development across the continent. With offices in Johannesburg and Côte d’Ivoire; Harith manages Africa’s first and only 15-year US$630m infrastructure fund, the Pan African Infrastructure Development Fund (PAIDF) 1 and recently announced the first close of the US$435m PAIDF2. The funds are invested in a number of major projects in diversified sectors such as energy, transport, information and telecommunications, and water and sanitation. PAIDF is supported by African capital raised from state pension funds, development finance institutions, top investment banks and financial institutions.
Harith is also in a partnership with Asset and Resource Management Company Ltd (ARM), a leading Nigerian financial services company which currently manages over US$2.7bn of assets, to form the ARM-Harith Infrastructure Fund (ARMIF). ARMIF invests in infrastructure projects in West Africa. In addition to ARMIF, Harith has a joint venture with East Africa’s PTA Bank to establish the US$1bn COMESA Infrastructure Fund (CIF) with a mandate to invest in the Common Markets for East and Southern Africa.
2) Any specific projects in the region that you are particularly excited about at the moment?
We invested in two transformational projects in Kenya.
a. Rabai is a 90MW power plant in Mombasa and the most efficient thermal plant in Kenya. The plant has been operational since 2009.
b. We are the largest shareholder in the Lake Turkana Wind Project – Africa’s largest wind project at 310MW. Construction is progressing on schedule and first power is expected in Q1 2017.
We are busy closing out a gas-to-power project in Tanzania which will transform the financial viability of TANESCO.
We recently acquired a company that specialises in linking local and regional gas sources to different local and regional markets. The company is active in South Africa, Mozambique and Botswana. We are currently busy establishing this company within Tanzania aimed at supplying cost effective, reliable energy to the industrial and automotive sectors. This is extremely exciting !
3) What are the challenges to getting power projects off the ground in the region?
1) Scale – a lot of developers are trying to develop projects that are too large for the countries they are in. This means they would rely on regional offtake which is challenging. It also means that it places a lot of strain on the fiscus of the host country.
2) Cost reflective tariffs – projects need to be selected that produce power below the price the end user is paying.
3) Trust deficit between the public and private sector.
4) The ability to underwrite sovereign commitments to projects.
4) How investor friendly is the region?
Very. Countries in the region rank high on the various Ease of Doing Business indices.
5) Which countries are doing well in attracting the right projects?
Ethiopia, Uganda, Rwanda.
6) You are addressing the EAPIC track on IPPs, entitled: “How are IPPs viewing the financing of future projects?”. Can you give us a sneak preview of your message at the event?
Harith recently concluded an agreement to merge its power assets with those of the Africa Finance Corporation. This will create an entity with 1.6GW of projects in operation and under construction making it the largest IPP in Africa. Utilising the experience the two entities have across Africa, this new platform will leverage this critical mass of assets to approach funding projects differently. Maintaining the governance and discipline associated with traditional project finance, this new entity will look at corporate as well as equity finance structures to fund projects of the appropriate scale for the relevant territories it is looking at investing in.
7) What are you most looking forward to at EAPIC?
Networking and meeting likeminded investors.
8) Anything you would like to add?
Energy is not just electricity. By far the largest energy requirement is in the transport sector and liquid fuels still make up the largest source of energy on the continent. Africa has abundant local oil sources, but still imports the majority of its refined fuel products. In addition there are massive local gas resources in the continent that remain stranded. These gas resources should be utilised to meet the continent’s energy requirements (especially the displacement of liquid fuels). This can expedited through matching the volume and location of existing demand for energy with the appropriate local and regional gas sources and scaling the opportunities accordingly. Available supply will lead to increased demand which will allow the requisite supply infrastructure to evolve over time.