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Africa Finance Corp and Egypt’s Infinity Group plan to raise as much as $4bn to double the size of a recently acquired business that’s already Africa’s biggest renewable power company.
The two firms agreed to buy Lekela Power last week and are seeking between $2.5bn and $4bn from capital markets over the next four years, Samaila Zubairu, AFC’s president and CEO, said in an interview.
“It’s the largest renewable pure play in Africa,” he said. “With this trajectory we are going to sustain that position.”
The duo are looking to take advantage of a drive by governments to increase access to electricity in Africa, the world’s poorest continent, through the provision of renewable energy from abundant solar and wind resources. Infrastructure-investment specialist AFC, based in Nigeria, and Infinity are buying Lekela from a group led by Actis in a transaction valued at $1.5bn.
“The best way for Africa to benefit is to first take ownership of its own strategy,” Zubairu said. “Access to energy is a big challenge in Africa. This platform, this acquisition, gives us an opportunity to pursue these opportunities at scale.”
When the deal is complete, AFC and Infinity will combine their renewable assets into a new yet-to-be-named entity. Cantor Fitzgerald, Norton Rose Fullbright and Absa advised the firms on the transaction, which comes amid a wave of consolidation in the industry in Africa. British International Investment has hired Rothschild to review options on how to grow its Globeleq unit and Actis is looking to sell its BTE Renewables business in SA.
Lekela has installed capacity of 1GW, while AFC and Infinity own about 400MW of generation assets. The combined group will have a pipeline of more than 3GW and the aim is to convert between half and two-thirds of that into operating assets within four years.
The potential projects — which include wind, solar and hydro — spans much of Africa including Democratic Republic of Congo, Ghana and Nigeria.
Much of the money required could come from development finance institutions AFC has previously worked with, Zubairu said. These include France’s Proparco, Germany’s KFW Group and the US International Development Finance Corp.
Charcoal and firewood
AFC is also looking to cut the continent’s reliance on charcoal and firewood for cooking fuel to reduce deforestation and air pollution. The World Bank blames the practice for shortening the lives of 500,000 Africans every year.
“The easiest way to keep trees in the ground is liquefied petroleum gas (LPG),” he said. “Harnessing flared gas, which contributes to carbon emissions, and converting that to LPG is a win-win for both the climate and for Africans. We are looking at investment in that space.”
AFC may also look for further acquisition opportunities, he said. The purchase of Lekela was 80% financed by equity and 20% debt.
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