Speaking during a power and electricity forum in Sandton, South Africa, managing director of Cowry Asset Management Limited stated that in efforts to meet the growing demand, Africa has an urgent need to raise the level of investment in its power sector by inviting private participation, reports The Nation.
Chukwu highlighted that currently the African continent has an installed electricity capacity of 147GW, however the continent needs to add 250GW of capacity between now and 2030.
Private participation can scale-up investment
He said the magnitude of investment required is such that governments will need public-private partnership in order to scale-up investment.
“The increasing gap between demand and supply of electricity in Africa and the realisation by governments of their inability to finance the required investment leading to the full or partial deregulation of the electricity sector in many African countries, have created a huge opportunity for private equity investment in the sector,” Chukwu said.
He, however, pointed out that the absence of cost reflective tariffs, integrated natures of national grid systems, regulatory framework have been some of the factors that discouraged private investors in the energy sector.
Chukwu explained that the vertical and horizontal unbundling of the previously concentric electricity systems in Nigeria have reduced both the capital requirement for investment and risks.
He further noted that advancement in renewable energy is creating another set of opportunities for investment with the prospects of disrupting the current industry architecture.
“With defined risks, improved economics and better technology, the viability of the electricity sector as investment outlet for private equity firms is better enhanced.”
Ckukwu added: “Aside renewable energy, the adoption of embedded generation from gas-fired plants to provide electricity to consumers in ring-fenced districts with capacity to pay commercial tariffs is creating a pipeline of bankable and fundable transactions for private equity firms.”