How Actis built a $1 billion African Renewable Energy Platform.
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How Actis built a $1 billion African Renewable Energy Platform.
Plus Zambia secures an incredible 1% Interest Debt Restructuring Deal, (EAIF) Invest $30 million in Tower Platform Provider
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In today’s email:
Infrastructure: How Actis Built a $1 Billion African Renewable Energy Platform.
Sovereign Debt: Zambia Secures an Incredible 1% Interest Debt Restructuring Deal.
Asset Management: Nambia creates a $ 1.1 billion hydrogen-focused Sovereign Wealth Fund.
Charts: The most outperforming African government bonds.
Deal Roundup: Notable deals of the week.
Infrastructure Finance
How Actis Built a $ 1billion African Renewable Energy Platform
With high energy potential, Africa faces imperative challenges in providing sustainable energy to its citizens. Over 640 million Africans do not have access to power, with constant electricity blackouts costing the continent as much as 4% of GDP. In sub-Saharan Africa (excluding South Africa) the electricity access rate is over 40 per cent, with the lowest emissions per capita of any region according to the IEA. All leading to negative climate and economic effects. For a decade Sub-Saharan Africa has had the largest electricity access deficit in the world rising to 568 million people in 2020.
The Market
The per capita consumption kWh of energy in sub-Saharan Africa (excluding South Africa) is among the lowest in the world compared to 13,000 kWh per capita in the United States and 4,500 kWh in the united kingdom. This presents huge potential for investors to tap into.
The Opportunity
Africa’s geographical fabric and high solar irradiance hold huge potential but are currently underutilised. The opportunity to provide sustainable energy through wind power and solar energy supported by energy technologies will drive economic growth, increase job creation, and improve education and health services while achieving development goals. The demand for energy generation is expected to grow to 7-8 % over the coming years. According to the Africa Development Bank, Africa needs US$288bn to reach the goal of universal access to electricity by 2030, requiring public and private, local and international partnerships to achieve this.
From an investment perspective extending the national grids is the least costly approach to achieve an acceptable return on investment. In rural areas, where high electricity deprivation is rife, mini-grids and stand‐alone systems, mostly solar-based, are the most viable solutions. Solar energy-driven renewables solutions including wind, hydropower and geothermal will pave the way for sufficient electricity supply as a catalyst for economic growth, with Solar PV quite popular and the cheapest source.
The Playbook
Actis has successfully built a strong reputation across the continent based on value-driven investing that adheres to the highest ethical standard while ensuring positive economic impact. Some of its well-known landmark investments are the Accra Mall in Ghana, Nigeria’s first LEED-certified commercial building Heritage Place and Cameroon’s first certified green building. Other infrastructure-focused investments include the Africa Data Center Platform and other renewable energy projects.
Its approach to building the BTE Renewable Energy platform was to buy, build and distribute renewable energy assets to the point of commercial operation while ensuring connectivity to the respective country’s national grid.
The building of the BTE Renewable platform started in 2017 when Actis and its Kenyan partner Craftskills Wind Energy International acquired respectively (USD 88 million) 88 per cent and 12 per cent stakes in the Kipeto project which was still in development from the IFC, a member of the World Bank Group and African Infrastructure Investment Managers’ (“AIIM”), a member of Old Mutual Alternative Investments.
They also received a $233 million senior debt from the US government via the Overseas Private Investment Corporation (OPIC). In 2019, Actis acquired South Africa-based Bio-Therm Energy to build out a platform focused on scalable wind and solar projects and rebranded the new entity to BTE Renewables (BTE).
Through BTE Renewables a series of power generation projects were developed with the 100MW Kipeto Wind Energy Project becoming Kenya’s second-largest wind project which consists of 60 GE turbines, generating an annual 380 GWh of energy and supplying an estimated 250,000 households. While maintaining the highest international standards in health, safety and environmental protection other projects were commissioned to commercial end such as:
South Africa’s solar PV project, MBP Solar Energy Facility with a generating capacity of 86 MW.
An onshore wind project called the Golden Valley energy facility in South Africa with a generating capacity of 120 MW and 48 turbines.
A 32.5MW and 13 turbines wind energy facility called The Excelsior in South Africa
A solar PV project called The Konkoonsies II solar energy facility also in South Africa generates 86MW with 250,160 modules and The Aggeneys solar energy with 46MW generating capacity and 140,640 modules.
Actis recently agreed to sell 100% of BTE Renewables (BTE) to Engie and Meridiam, with Engie acquiring all the South African portfolio and team while Meridiam will acquire the Kenyan portfolio and team. This emphasises the role Actis plays in being developers of scalable and commercial-focused energy platforms while ensuring environmentally friendly impact.
Sovereign Debt
Zambia secures an incredible 1% Interest Debt Restructuring Deal.
Zambia has agreed to a $6.3 billion bilateral debt restructuring deal with a group of creditors led by China and France, The agreement was secured under the Common Framework that includes the Paris Club and emerging new lenders like China.
Africa’s second-biggest copper producer was the first country in the continent to default on its sovereign debt during the world COVID-19 crisis and has yet to access the $ 1.3 billion IMF bailout.
Zambia’s largest creditor is China, owing $4.1 billion to the Export-Import Bank of China
Under the agreement, Zambia will pay interest rates of 1% until 2037 and with maturities of $6.3 billion in bilateral debt due in 2043.
After 14 years the interest rates will increase to 2.5%
Zambia would hope to receive similar favourable debt restructuring conditions from private creditors like bondholders of its $3 billion in Eurobonds, which has accrued more than $500 million in arrears.
Bonds
African Government Bonds outperform EM investment-grade
(Source Bloomberg )
Zambia, Nigeria and Egypt’s junk-rated government dollar bonds outperformed the average emerging markets index during the month of June as reported by Bloomberg. These countries are currently going through some economic changes with Nigeria’s newly elected pro-market president and Zambia's favourable debt restructuring deal.
Wealth Management
Nambia creates a $1.1 billion Green-Hydrogen-focused Sovereign Wealth Fund.
Nambia through its SDG Nambia One is to build a dedicated infrastructure mixed fund to invest in green hydrogen projects across Southern Africa. The Fund with the participation of Namibia’s Environment Investment Fund, The Netherlands’ Climate Fund Managers BV and Invest International BV will raise further investments from local and international investors, as part of the new deal:
Invest International BV has committed an initial grant financing of €40 million
The Namibian government plans to use the fund to acquire a 24% equity stake in the first awarded project being developed by Hyphen Hydrogen Energy at a historic cost,
South Africa also recently announced the launch of a similar fund the SA-H2 a $1 billion green-hydrogen fund with backing from the Development Bank of Southern Africa, Industrial Development Corp. of South Africa Ltd., Climate Fund Managers and Invest International.
Deals
Private Equity
Emerging Africa Infrastructure Fund Invests $30 Million in Eastcastle Infrastructure
Emerging Africa Infrastructure Fund (EAIF) managed by Ninety-One has committed $30m to shared telecom tower infrastructure platform provider Eastcastle Infrastructure. The investment will fund the purchase and development of telecom towers across the Democratic Republic of Congo (DRC) for the country’s mobile network operators (MNOs).
Private Credit
Verdant Capital's Hybrid Fund makes big moves with two private credit investment
Verdant Capital’s Verdant Capital Hybrid Fund (the “Fund”) is positioning itself as a leading private credit provider across the continent with two investments. The Fund completed a $ 9 million investment, structured as a holding company loan in LOLC Africa’s holding company, which will be invested in the lending subsidiaries in Zambia, Egypt, Kenya, Tanzania, Nigeria, Malawi, Zimbabwe, Ghana, and the Democratic Republic of Congo. The investment will help expand LOLC Africa’s expansion of micro, small and medium enterprises (MSMEs) financing in Africa. The fund has also made a $7 million dual-tranche investment comprising a subordinated loan and senior secured loan to Kenya’s leading fintech asset financing platform Mogo Kenya the investment will help Mogo Kenya expand its portfolio of motorbike (fuel and electric-powered two-wheelers, locally known as “boda-bodas”), tuk-tuk (three-wheeler), car, and car logbook or leaseback financing throughout the country.
Venture Capital Deals
Nigeria-based investment firm Verod-Kepple Africa Ventures (VKAV), has invested $1.5 million in a Chari a Moroccan B2B e-commerce company. The new investment will fund Chari's growth plan including improving its financial services infrastructure.
Norway’s development finance institution Norfund has made an investment of $12 million in OH Ecosystems Ltd (Eco) which builds and operates cocoa processing and confectionery businesses in Africa has recently acquired a majority stake in FTN Cocoa Processors Plc – Nigeria’s listed cocoa company.
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