Africa’s power sector leaders must devise new mechanisms to attract more private sector investment into power transmission lines, energy experts agreed at a technical roundtable last week.
The meeting, hosted by the African Development Bank to mark the 3rd Africa Energy Market Place (AEMP), explored how to structure private sector financing to meet the investment needs of transmission lines. It also covered the investment priorities of transmission companies, alternative funding options, and bankable transaction structures.
Chairing the discussions, Batchi Baldeh, Director for Power Systems Development at the Bank noted that private investments in transmission networks under Public Private Partnership arrangements, will be critical to complement Government budgets and ensure timely delivery of cost-effective power to consumers.
Annual investments required for 2015-2040 to expand the transmission networks are estimated at $3.2 billion to $4.3 billion.
“The private sector is key to closing this finance gap. Private finance has supported the expansion of electricity transmission infrastructure in many regions of the world and the same can happen in Africa”, Baldeh said.
Participants included energy stakeholders from the African Development Bank, World Bank, USAID’s Power Africa, Commonwealth Development Corporation’s Gridworks, private developers and public utilities. They discussed how mechanisms that have worked elsewhere could be replicated in sub-Saharan Africa, especially the need for strong government support and credit enhancement.
“We know how to structure, finance, build, operate IPPs. We have also seen Independent Power Transmission models succeed in Africa (e.g. Mozambique Transmission Company, MOTRACO),” said Angela Nalikka, the Bank’s Manager for National and Regional Power Systems.
She said the meeting helped participants to explore the possibility of implementing pilot independent power transmission lines and understand the structuring and financing prerequisites.
Since 1999, the Bank Group has supported transmission and distribution projects with more than $3.25 billion, mainly for national and regional projects. In November 2018, it hosted a regional Transmission Line Dialogue event at the Africa Infrastructure Forum in South Africa, which brought together investors, the African Union and power pools to discuss initiatives and regional power market development.
An initiative of the Bank, the AEMP is a tripartite platform of government representatives, development partners and private sector investors, to address key barriers to mobilizing and scaling-up of private investment into the energy sector.