‘Affordable, reliable, sustainable and modern energy for all’: private equity powering SDG 7

Last week Denham Capital announced a new natural gas-fired power project that will provide 4.5TWh of secure, affordable energy to Nigerians. Themis, an Africa-focused power company backed by Denham, will partner with Kingline to develop a 550MW natural gas-fired power plant in Ondo State, Nigeria. This landmark project is scheduled to proceed to financial close in Q2 2020 and become fully operational in 2022.

Despite being Africa’s most populous country, Nigeria currently only has 4,000MW of operational capacity, which does not even cover a third of its 15,000MW demand. It is no surprise then that the country has one of the lowest energy consumption rates per capita in the world, at only 100kWh. When compared to South Africa’s 5,000kWh and the USA’s 12,987kWh, the gravity of Nigeria’s energy crisis is undeniable.

With African governments across the continent focusing on ensuring access to ‘affordable, reliable, sustainable and modern energy’ in line with Sustainable Development Goal 7, private investment in this sector is of paramount importance. To take advantage of the liberalisation of the power sector in Africa, Denham Capital launched a new Africa Power Investment Platform last year in partnership with Themis. The platform has an initial target of $250 million of equity investments in natural gas and renewable power generation across the continent.

Many African governments, including Nigeria, have turned to privatisation as a means of solving the acute challenge of financing large-scale energy provision. This has opened a space for private equity firms to provide the much needed capital to industry-leading projects with the scope to have a real impact on access to power in Africa. This is Scott Mackin’s ambition for Denham. The firm launched its first Annual Impact Report in 2018 and Mackin has noted that having ‘already built up a strong track record in Africa … we are poised to become leaders in this space’.

Africa’s growth story has come into question in recent years with longer investment horizons and pure growth investments under-performing ambitious forecasts linked to regional or demographic growth. What will the big future opportunities in Africa be? Will projects such as Denham Capital’s new natural gas-fired power plant drive future investments for the continent?

Join us at The Annual Debate to hear from Scott Mackin and others on the future of private equity in Africa.