A combination of a challenging business environment, liquidity constraints as well as a limited number of financially credible off-takers in many jurisdictions indicates that there may be a need for right-sizing some of Africa’s planned power projects, according Shepherd Aisam, Head of Corporate and Investment Banking (CIB) at Stanbic Bank Botswana.
Looking across 78 power project developments, identified in 13 of the 20 African countries Standard Bank has a presence in, including Botswana, shows that over half these projects are anticipated to have medium-sized capacity of 30-300MW. Approximately 40% are expected to be large-scale power plants with installed capacity greater than 300MW. Small-scale power plants of under 30MW capacity are expected to account for the remaining 10%.
For example, in Mozambique alone, approximately 15 power projects have either been announced or are under development. They are primarily sponsored by a combination of large energy consumers, like global mining companies, and local private and public utilities.
“In the unlikely event that all 15 of these projects were to simultaneously come on line, the additional capacity to the national grid would be around 5.3GW. This is certainly more than the country currently requires,” said Jeannot Boussougouth, Executive: Power & Infrastructure at Standard Bank.
Furthermore, since the total capital cost of the 15 power projects is estimated at around $13.9bn or 87% of Mozambique’s expected 2016 GDP, “it is likely that only a few of these planned power projects will eventually come on line in the medium term,” added Boussougouth.
In Botswana, Standard Bank, parent to Stanbic Bank Botswana, is aware of six power projects that have been announced, including Morupule B (5&6). Together they would add approximately 1.7GW of capacity to the national grid for a combined capital cost requirement of almost $3.4bn – despite the country’s peak power demand being estimated at only 578MW.
“While in future there will be opportunities to export additional capacity to South Africa and other energy-deficient regional economies, the appropriate transmission networks and regulatory environments may not yet be in place, thereby adding to the complexity of implementing an efficient regional, and perhaps continental, energy trading. Clearly, a degree of rightsizing some of the above-mentioned planned power projects is required,” said Boussougouth.
Stanbic Bank Botswana has a deep understanding of Africa’s power sector dynamics. This has been developed though long relationships with the continent’s project developers, operators, investors and key sector decision makers. As such, “we are well-positioned to advise on broader regional load requirements and sustainable national energy mixes as they effect the long-term viability of projects,” said Aisam.