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Released June 23, 2016 | SUGAR LAND
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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Although Africa's demand for new electrical power generation is forecast to grow by more than 66% through 2040, according to EY (Ernst & Young) (London, England), this growth potential will be conditioned by capital project fund availability and the steady political development will of national governments.
On the side of a positive power and energy scenario for the continent, renewable and sustainable power sources are already showing the ability to attract increased investment with government encouragement, as are natural gas-fired projects.
The International Energy Administration (IEA) has estimated $450 billion will be required for the construction of new generation capacity for the continent through 2040. There will also be major investment opportunities in the development of transmission and distribution systems and in the refurbishment and rehabilitation of existing plants.
The revised International Monetary Fund (IMF) growth figure for Africa for 2016 of 3% is just half of an earlier forecast of 6.1%. In current conditions, investors continue to look at energy, and with the rise in disposable income, infrastructure projects, financial service and road building are being driven by the increasing consumer spend.
After hitting historic records in 2015, global power and utilities deal value continued to climb, reaching a five-year high of $44.4 billion in the first quarter of 2016--a 50% increase over the same period in 2015 according to an EY (Ernst & Young) (London, England) report.
A growing deal imbalance globally across the power sector drove investors to renewable and regulated assets, with the potential to accelerate growth and generate stable earnings. Transactions involving these assets accounted for 67% of total global deal value at $26.9 billion, said the EY report.
South Africa should see major power generation projects come on-stream over the next five years (including the 4,800-megawatt (MW) Medupi and Kusile coal-fired plants). Eskom (Johannesburg), South Africa's national power utility is forecasting that when the current expansion program is completed in five years, 17,348 MW of capacity, 9,756 kilometers (km) of transmission lines and substation capacity of 42,470 megavolt amperes (MVA) will have been added to the national network. These additions should ensure a secure power supply, even if industrial and domestic demand has risen. At present, Eskom is keeping supply steady under capacity constraints, bar a few possible blackouts, as demand from an economy in the doldrums is stagnant.
The utility has announced that the fourth 330-MW unit of its Ingula pumped storage plant has been linked to the system. The $1.6 billion plant will add a total of 1,332 MW when in full commercial operation, commencing in 2017.
A growing deal imbalance globally across the power sector drove investors to renewable and regulated assets, with the potential to accelerate growth and generate stable earnings. Transactions involving these assets accounted for 67% of total global deal value at $26.9 billion, said the EY report.
Sub-Saharan Africa has 600 million of the 1.3 billion people around the world who lack access to electricity, with demand for electricity increasing more than 66% through 2040. Globally, the demand for electricity is expected to grow at a compound annual growth rate (CAGR) of 2.1% to 2040, with most demand coming from emerging markets, with the largest growth coming from Africa at 4%. West and East Africa will experience the highest growth in electricity demand, with the Central African region experiencing the lowest demand.
The power sectors of a number of African countries have transformed their policies, including Uganda and Kenya. Investment in South Africa's Renewable Energy Power Producer Procurement Program (REIPPPP), having attracted $13 billion, looks set to spawn more projects, provided that the government does not have its attention diverted by traditional base load and 9,600 MW macro nuclear generation projects.
For related information see April 21, 2015, article- - South Africa Pushing Renewable Independent Power Producers to 6,300 Megawatts.
Mega power projects are under construction in Ethiopia and Egypt. The latter has seen the arrival of two Siemens AG 400-MW turbines and six 500-kilovolt (kV) generator transformers at the Ben Suef power plant site. The completed 4,800-MW plant will be the largest gas-fired combined cycle power plant in the world.
Ethiopia's ambitious hydropower development, including the $4.1 billion Grand Renaissance Dam and the $1.8 billion Gilgel Gibe 3 projects, will boost national generating capacity by 12,000 MW in company with other planned renewable energy projects.
In North Africa, Morocco is progressing with the Ouarazazate concentrated solar power project, which, on completion, will add 500 MW of available power. In Algeria, South Korean and Spanish companies are working on gas fueled and solar renewable projects, which will see five-figure power capacity additions through 2020.
Nigeria has progressed the opening up of opportunities for private and foreign investment in generation and distribution. But the overall picture of the country's energy sector has been bedeviled by paralysis in fuel supply and the inability of government to take radical and sustained action to solve the problem. Since the new government of President Bukhara came into power in May 2015, things in the sector have been going sideways or backwards.
There have been blackouts and chronic system collapses this year, which the Nigerian government attributes to the vandalism on pipelines cutting the supply of gas to power stations. On one day in the first half of June, generation fell from a peak of 3,207 MW to a low of 1,233 MW. This is in a country with a population of 180 million and claims to be the continent's largest economy and its leading oil exporter. "Dysfunctional" and "epileptic" are terms used locally to describe the power sector.
For related information see April 27, 2015, article--Nigeria's New President Faces Power Challenges as Grid Supply Dips Below 3,000 Megawatts and November 20, 2014, article--Gas Supply Failure Stalls Private Investment in Nigerian Power Plants.
Major international power project companies have committed to Nigeria's power sector, with power supply guarantees being a part of the deals. The expansion drive behind manufacturing and infrastructure will force solutions to the problem.
Hope for the country's economy and energy sector could lie with the devaluation of the country's currency, the naira. On the day the "flexible exchange rate" was introduced, the currency slid by as much as 27%, from a pegged rate of 197 naira to one U.S. dollar, to a rate of 254 naira to one U.S. dollar.
The Central Bank of Nigeria said last week that it would engineer a devaluation of the naira, adopting a "purely market-driven" system from June 20 as the oil-exporting country tries to withstand a rout in global prices, according to the Financial Times.
The rating agency Moody's said the likely consequence of the naira depreciation would be a significant increase in oil-related revenue. Net portfolio inflows fell to $2.5 billion in 2015 from $13.2 billion in 2013. The flexible exchange rate will allow banks to expand their trade business supporting their fee income and profitability.
Now could be the time for the beginning of a turnaround in Nigeria's energy development and a more secure project investment profile.
PowerGen Africa and DistribuTECH 2016 will take place at the Sandton Convention Center in Johannesburg July 19 -21. Industrial Info will be represented by senior sector executives at stand D16 during the exhibition and conference, which will be attended by leading players in the African and international power sector.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
On the side of a positive power and energy scenario for the continent, renewable and sustainable power sources are already showing the ability to attract increased investment with government encouragement, as are natural gas-fired projects.
The International Energy Administration (IEA) has estimated $450 billion will be required for the construction of new generation capacity for the continent through 2040. There will also be major investment opportunities in the development of transmission and distribution systems and in the refurbishment and rehabilitation of existing plants.
The revised International Monetary Fund (IMF) growth figure for Africa for 2016 of 3% is just half of an earlier forecast of 6.1%. In current conditions, investors continue to look at energy, and with the rise in disposable income, infrastructure projects, financial service and road building are being driven by the increasing consumer spend.
After hitting historic records in 2015, global power and utilities deal value continued to climb, reaching a five-year high of $44.4 billion in the first quarter of 2016--a 50% increase over the same period in 2015 according to an EY (Ernst & Young) (London, England) report.
A growing deal imbalance globally across the power sector drove investors to renewable and regulated assets, with the potential to accelerate growth and generate stable earnings. Transactions involving these assets accounted for 67% of total global deal value at $26.9 billion, said the EY report.
South Africa should see major power generation projects come on-stream over the next five years (including the 4,800-megawatt (MW) Medupi and Kusile coal-fired plants). Eskom (Johannesburg), South Africa's national power utility is forecasting that when the current expansion program is completed in five years, 17,348 MW of capacity, 9,756 kilometers (km) of transmission lines and substation capacity of 42,470 megavolt amperes (MVA) will have been added to the national network. These additions should ensure a secure power supply, even if industrial and domestic demand has risen. At present, Eskom is keeping supply steady under capacity constraints, bar a few possible blackouts, as demand from an economy in the doldrums is stagnant.
The utility has announced that the fourth 330-MW unit of its Ingula pumped storage plant has been linked to the system. The $1.6 billion plant will add a total of 1,332 MW when in full commercial operation, commencing in 2017.
A growing deal imbalance globally across the power sector drove investors to renewable and regulated assets, with the potential to accelerate growth and generate stable earnings. Transactions involving these assets accounted for 67% of total global deal value at $26.9 billion, said the EY report.
Sub-Saharan Africa has 600 million of the 1.3 billion people around the world who lack access to electricity, with demand for electricity increasing more than 66% through 2040. Globally, the demand for electricity is expected to grow at a compound annual growth rate (CAGR) of 2.1% to 2040, with most demand coming from emerging markets, with the largest growth coming from Africa at 4%. West and East Africa will experience the highest growth in electricity demand, with the Central African region experiencing the lowest demand.
The power sectors of a number of African countries have transformed their policies, including Uganda and Kenya. Investment in South Africa's Renewable Energy Power Producer Procurement Program (REIPPPP), having attracted $13 billion, looks set to spawn more projects, provided that the government does not have its attention diverted by traditional base load and 9,600 MW macro nuclear generation projects.
For related information see April 21, 2015, article- - South Africa Pushing Renewable Independent Power Producers to 6,300 Megawatts.
Mega power projects are under construction in Ethiopia and Egypt. The latter has seen the arrival of two Siemens AG 400-MW turbines and six 500-kilovolt (kV) generator transformers at the Ben Suef power plant site. The completed 4,800-MW plant will be the largest gas-fired combined cycle power plant in the world.
Ethiopia's ambitious hydropower development, including the $4.1 billion Grand Renaissance Dam and the $1.8 billion Gilgel Gibe 3 projects, will boost national generating capacity by 12,000 MW in company with other planned renewable energy projects.
In North Africa, Morocco is progressing with the Ouarazazate concentrated solar power project, which, on completion, will add 500 MW of available power. In Algeria, South Korean and Spanish companies are working on gas fueled and solar renewable projects, which will see five-figure power capacity additions through 2020.
Nigeria has progressed the opening up of opportunities for private and foreign investment in generation and distribution. But the overall picture of the country's energy sector has been bedeviled by paralysis in fuel supply and the inability of government to take radical and sustained action to solve the problem. Since the new government of President Bukhara came into power in May 2015, things in the sector have been going sideways or backwards.
There have been blackouts and chronic system collapses this year, which the Nigerian government attributes to the vandalism on pipelines cutting the supply of gas to power stations. On one day in the first half of June, generation fell from a peak of 3,207 MW to a low of 1,233 MW. This is in a country with a population of 180 million and claims to be the continent's largest economy and its leading oil exporter. "Dysfunctional" and "epileptic" are terms used locally to describe the power sector.
For related information see April 27, 2015, article--Nigeria's New President Faces Power Challenges as Grid Supply Dips Below 3,000 Megawatts and November 20, 2014, article--Gas Supply Failure Stalls Private Investment in Nigerian Power Plants.
Major international power project companies have committed to Nigeria's power sector, with power supply guarantees being a part of the deals. The expansion drive behind manufacturing and infrastructure will force solutions to the problem.
Hope for the country's economy and energy sector could lie with the devaluation of the country's currency, the naira. On the day the "flexible exchange rate" was introduced, the currency slid by as much as 27%, from a pegged rate of 197 naira to one U.S. dollar, to a rate of 254 naira to one U.S. dollar.
The Central Bank of Nigeria said last week that it would engineer a devaluation of the naira, adopting a "purely market-driven" system from June 20 as the oil-exporting country tries to withstand a rout in global prices, according to the Financial Times.
The rating agency Moody's said the likely consequence of the naira depreciation would be a significant increase in oil-related revenue. Net portfolio inflows fell to $2.5 billion in 2015 from $13.2 billion in 2013. The flexible exchange rate will allow banks to expand their trade business supporting their fee income and profitability.
Now could be the time for the beginning of a turnaround in Nigeria's energy development and a more secure project investment profile.
PowerGen Africa and DistribuTECH 2016 will take place at the Sandton Convention Center in Johannesburg July 19 -21. Industrial Info will be represented by senior sector executives at stand D16 during the exhibition and conference, which will be attended by leading players in the African and international power sector.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
