Globeleq Piecing the African Power Game Together

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Researched by Industruialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Looking to develop and consolidate a key position in African power generation development markets is CDC Globeleq (London, United Kingdom), a UK government owned entity that grew out of the Commonwealth Development Corporation (CDC).

CDC Globeleq has invested $116 million to acquire two major assets from the U.S. based AES Corporation (NYSE:AES) (Arlington, Virginia), which was having cash flow problems.

It has taken a controlling stake in the Songas project, in which Tanzanian state controlled companies have an interest. The project is expected to provide indigenous gas to the country's capital Dar es Salaam and provide clean and reliable power to the Tanzanian grid.

Globeleq's other African acquisition is the 600 MW coal-fired Kelvin power station in Johannesburg, South Africa, which supplies low cost electricity to 270,000 consumers in the city. Globeleq has a 95% interest in Kelvin with the balance held by Global Power, a black empowerment partner.

Looking for regional synergies the company has a 30% stake in Kenya's Kipevu 11 Tsavo power plant, which is expected to deliver 74 MW to the nationals grid for the next 20 years. Discussions are also at an advanced stage with the Ugandan government on their privatization of the country's electricity distribution company UEDC. The company also owns 11% of Azito Energie in the Cote D'Ivoire.

Globeleq's investments in the African continent now account for about 20% of its overall portfolio, which is worth over $600 million, covering 21 power assets in 15 developing countries. They are looking to make an additional investment in Africa of between $50 - $100 million gain in 2003.

In the short to medium future Globeleq will complete more acquisitions in west or east Africa with 1,000 MW under the company's control in East Africa, above 1,000 MW in West Africa and between three and four gigawatts of power in Southern Africa.

According to the World Bank, the African continent has 35% of global hydropower potential, 10% of known global reserves of oil and gas and 200 billion tons of coal. The uneven distribution of these resources has led to a continuous search for abundant and cheap energy, with a focus on rationalizing the territorial distribution of existing but unevenly allocated energy resources.

The high urban concentration of electricity energy has resulted in a wide rural-urban gap and low electrification rates of 15% in Kenya and 5% and 10% for Uganda and Tanzania respectively.

Given this scenario, liberalization of the power sector in all affected courtiers is being pushed and studies on power marketing structures are ongoing.

Cross border projects with a total cost of around $400 million are in the planning stage.