by Detail Solicitors | Mar 20, 2016 | Articles
The Electrify Africa Act 2015 was passed by the US Congress with bi-partisan support and was signed into law by President Barack Obama on the 9th of February, 2016. The Act seeks to encourage the efforts of countries in sub-Saharan Africa to improve access to affordable and reliable electricity; specifically, the Act seeks to promote first time access to power services for at least 50 million residents of sub-Saharan Africa by 2020 in both urban and rural areas. The Act proposes to achieve this objective by encouraging the installation of at least 20,000 additional megawatts (MW).
It is estimated that among the regions 800 million residents, over 580 million people do not have access to electricity. To address this situation, President Obama launched the Power Africa initiative in 2013. This project is a partnership among the U.S. Government, African governments, bilateral and multilateral development partners, and the private sector. The United States made an initial US$7 billion commitment which as at 2015 had leveraged nearly US$43 billion in commitments which sum includes more than US$31 billion in commitments from private sector participants. To put these sums of money in context, McKinsey estimates that it will cost US$835 billion to electrify all of Sub-Saharan Africa by 2030.
The Electrify Africa Act 2015 not only provides a legal framework for the United States continued leadership role in the Power Africa initiative, it also ensures that the program will continue even after the next President takes office in early 2017.
In this article we examine the potential impact of the Act and the Power Africa initiative on the Nigeria Electricity Supply Industry (NESI).
B. Key provisions of the Act
i) Development of a comprehensive, multiyear strategy: Requires the President to establish a comprehensive, integrated multiyear strategy to encourage the efforts of countries in sub-Saharan Africa to implement national power strategies and develop the appropriate mix of power solutions. It also requires that the plan created by the President be sufficiently flexible and remain responsive to technological innovation in the power sector.
Further the Act requires the Administration issue a detailed report on its planned efforts to implement the strategy including a description of how the President intends to promote trade in electrical equipment with countries in sub-Saharan Africa.
ii) Prioritize efforts and assistance for power projects: Mandates US Government Agencies and Corporations including the United States Agency for International Development (USAID), the U.S. Trade and Development Agency (USTDA), Overseas Private Investment Corporation (OPIC) and the Millennium Challenge Corporation to prioritize and expedite institutional efforts and assistance to facilitate the involvement of such institutions in power projects and markets both on and off grid.
iii) Leveraging international support: Requires that U.S. representatives to appropriate international bodies encourage those bodies to increase efforts to promote investment in the sub-Saharan electricity sector and utilize clear, accountable and metric-based targets to measure the effectiveness of such projects.
iv) Authorisation of the OPIC: The Act extends OPIC's mandate (through to 2017) to provide loans where the total support of OPIC does not exceed US$ 50 million and local currency guarantees to help U.S. companies to invest and expand in overseas markets. It also urges OPIC to prioritize investment in the electricity sector of sub-Saharan Africa.
C. Power Africa: A summary
Power Africa is a global partnership established by the United States and includes over 120 public and private sector partners including US Government Agencies & Corporations, the World Bank, the African Development Bank among others (a list of the Core Power Africa partners and their respective roles is available here).
Since being established, Power Africa has provided support to transactions with the potential to generate approximately 29,000MW of electricity, including projects expected to generate more than 4,300MW that have already reached financial close. Power Africa focuses on first of their kind transactions across sub-Saharan Africa so that the countries develop a track record which creates future pathways to development.
D. Power Africa in Nigeria
In July, 2014 the Federal Government of Nigeria and the US Government entered into a Memorandum of Understanding regarding Power Africa. Under the terms of the MOU the US Government through USAID and USTDA pledged the sum of US$31millon to support the privatisation of Nigeria's electricity sector, reform of the gas sector, and development of renewable electricity generation. This support is primarily through the provision of technical assistance.
The table in the link below highlights some of the Key transactions the Power Africa partnership has been involved in since the execution of the MOU.
CLICK HERE TO VIEW THE TABLE OF KEY TRANSACTIONS IN THE POWER AFRICA PARTNERSHIP
Going forward in the Power Africa Roadmap 2016, the partners in the Power Africa project have outlined specific plans in Nigeria to:
Scale up on-the-ground transaction support by deploying additional Transaction Advisors to help unlock stranded generation and support new renewable energy projects.
Support new feasibility studies and technical assistance programs including, funding a feasibility study for a proposed 275 MW gas-fired power project in Ogun State, a 50 MW solar PV project in Kaduna State, and a gas fired power project in Ogun State that could potentially generate up to 100 MW.
E. Conclusion
The Electrify Africa Act seeks to institutionalise the Power Africa initiative and ensure that future U.S. Administrations are bound to continue the project regardless of political leanings. This will help consolidate the gains made by the Power Africa partners in Nigeria and the African continent.
Power Africa's focus on first of their kind transactions and providing ongoing technical support will assist in building institutions capable of meeting Nigeria's and indeed sub-Saharan Africa's energy needs. The adage that "give a man fish and you feed him for a day, teach him to fish and you feed him for a lifetime" is particularly apt in this regard.