Africa’s Local Resources Are Good for Sustainability and Low Power Prices

Africa is transforming into an investor’s dream with all the right resources and supply chains.
Published: Fri 15 Aug 2014

Africa is a well-endowed, resource-rich continent with an intrinsic platform. Yet, it remains severely underserved, says Paddy Padmanathan, CEO, ACWA Power who spoke to Engerati at the Africa Energy Forum.

Recognising the continent’s impressive potential and need for power, ACWA Power aims to provide electricity and water at the lowest possible price. The firm puts up the capital and develops the power plants which they operate themselves for a few decades. The power sold is payback for the initial capital outlay.

Local content will keep African power prices down

ACWA Power entered Africa only three years ago after realizing that Africa’s governances have changed, explains Padmanathan. He says that Africa is seeing an increase in the number of young people being educated and industries are growing significantly. In addition to this, countries now have a platform of supply chains. “These are the necessary ingredients that will help us to get long term financing which is essential to keep the tariff down from day one. By maximizing local content, including goods and services, as well as local skills, we intend to enhance the economic development in various African countries. This is the most sustainable way of keeping costs down,” he explains. Energy efficiency solutions are also being adopted in order to optimize local resources.

Africa’s resources are of bigger value today since the world is becoming more resource consumptive, he says. Stability, a reasonable track record of sensible economics, reasonable population base, and an industrial infrastructure which doesn’t have to be sophisticated, gives ACWA Power the ability to carry projects forward and keep the prices down. The firm is currently carrying out power projects in Namibia, Botswana, Mozambique, South Africa, Morocco and Egypt.

Nigeria may be on the cards in the future but due to its sheer size and power requirements, ACWA Power does not want to get involved from the initial development stage. Padmanathan expands, “Initial development will be slow. The first power purchase agreement will take time and we are therefore happy to let other companies go ahead of us. We will get involved once projects kick off and momentum is built up.”