POWER INDABA Cape Town 14-16 March 2011 Powering the future on Africa s terms? The role of the AfDB and its perspectives on the Continent s electricity growth potential Emmanuel NZABANITA Manager, North, East and South Energy Department AfDB
Presentation Outline Who we are AfDB s Mission and Objective Infrastructure deficits Power Sector in Africa AfDB s Goals in the Power sector The ADB Power Strategy in Africa Changing the Status Quo Africa s Power Generation Potential PPP Key Success Factors Government s Role, AfDB s Roles Instruments Conclusions Contacts 2
The African Development Bank AfDB is the Pan-African Multilateral Development Bank established on August 4, 1963. Has 77 members; 53(soon to be 54 with Southern Sudan) Regional Members and 24 Non-regional. http://www.afdb.org/en/aboutus/members/ AfDB leverages its AAA, UA 100 billion strong balance sheet to support the economic development in its regional member countries AfDB has consistently been a major financier to the Energy Sector in Africa Non-Concessional ADB window Commercial terms Concessional ADF window 3
AfDB s Mission & Objective To spur sustainable economic development and social progress in its regional member countries (RMCs) and contribute to poverty reduction. The Bank Group achieves this objective by: mobilizing and allocating resources for investment in Regional Member Countries; and providing policy advice and technical assistance to support development efforts. 4
The infrastructure Deficit in Africa Hinders the possibilities for economic expansion. Africa s Infrastructure is extremely deficient and arguably twice as expensive as other parts of the developing world. As a result, MDG s are far from being met ICA s (AICD) report, finds that Africa needs to invest $93.4 billion per year in energy, telecoms, transport and water infrastructure over the next decade. 5
Power is Africa s largest infrastructure challenge ($bn) 6
State of the Power Sector in Africa About only one-fifth of the sub-saharan population has access to electricity. The installed generation capacity of the whole of sub-saharan Africa, 48 countries, is 68GW no more than Spain s. 30 countries across the region suffer from chronic electricity shortages. Africa s chronic power problems will only be resolved through both efficiency savings and major spending in power infrastructure (generation, transmission and distribution) of about $26 billion per year over the next ten years. Source: AICD Report 7
Climate Change: Additional Burden to Infrastructure Development. Climate change adds an additional burden and impacts are magnified where poverty is pervasive and social safety nets are weak. Without mitigation measures, CC will strain current infrastructure and will cost Africa about 2% of GDP by 2040 8
Power sector Goals AfDB priority is to: Increase energy access: a priority Encourage Private Sector participation Mobilize all possible resources (regional and non-regional) 9
AfDB s Power Strategy African countries' energy development strategy geared to the goal of access-for-all should be anchored on four pillars: maximize clean energy options where possible and encourage clean technology emphasize energy efficiency participate more effectively in international carbon credit markets Encourage regional interconnections. 10
Africa Power Generation Potential Africa is well endowed with large-scale, cost-effective energy resources but they tend to be located a long distance from the major demand centers and their development is often too expensive for the countries where they are found. Power generation potential: DRC Mozambique Botswana South Africa Zambia Ethiopia 11
Changing the Status Quo - PPPs Generation Public and Private sector Transmission Public and Private Distribution Public (Rural Electrification) and Private (Urban Electrification e.g. Umeme Uganda) Key problem on the continent is not a lack of funding instead it is a lack of packaged, bankable projects 12
PPP key success factor is Preparation Comprehensive project preparation is key to successful PPP transactions 1. Enabling environment - Designing enabling legislation / regulatory approaches - Reforming project-relevant relevant institutions / policies - Building capacity / consensus to support the project 4. Preparing project for market - Select the right advisers - Identify risks, mitigants and dispute resolution mechanisms - Develop comprehensive PPP contract 2. Project definition - Identifying desired outputs - Conducting pre-feasibility studies - Preparing a detailed action plan - Identifying project champions 5. Bidder selection - Selection of the right operator will be key to the project s s success - Maximise benefits of competitive tensions - Deliver the best bid from the most competent bidder 3. Project feasibility - Performing financial modeling - Economic, social, technical and environmental studies - Legal assessment 6. Financial close - Success considered when construction completed and satisfactory level of service is provided - Close monitoring is key Selecting the right advisers and involving DFIs at an early stage is of paramount importance to the success of the project 13
Government s Role Creating the conducive environment for the exploitation and distribution and sharing of the resources (Regulatory frameworks, Policies, strategies etc.) Reducing the operational inefficiencies of power utilities through institutional reforms. Funding Rural Electrification and network expansions 14
AfDB s Role ADB Public Sector window Finance technical assistance and capacity building Funding project preparatory studies Provide concessionary funding for government equity contribution and the vital commercial unviable links and resource mobilization Advice to Governments on sector restructuring and project prioritization Facilitate dialogue between governments for national and regional projects ADB Private Sector window Assist and counsel governments for project structuring Provide equity, sub-debt or loans to the project sponsor Provide risk management products to the project sponsor Facilitate dialogue between governments and private company for national and regional projects 15
Instruments The Bank will use an array of instruments that aim to leverage resources and support RMC government in meeting the sustainable energy challenge. 16
Financing to unlock Africa s clean energy potential Concessionary resources Africa Green Fund Climate Investment Funds (CTF and SCF) Sustainable Energy Fund for Africa Bilateral trust funds Private capital Fund for Private Sector Assistance Seed Capital Assistance Facility Clean Energy Bonds Market mechanisms Africa Carbon Support Program Carbon markets 17
Conclusion There is significant energy resource endowment in Africa Africa has the opportunity to develop a low carbon economy Africa has faired much better that other parts of the world over the last few years. African Development Bank is playing a major role in the financing architecture for electricity related investments
Contact The Manager Energy Division, East and South Regions Energy, Environment and Climate Change Department Tel: +216 71 10 30 94 Fax: + 216 71 33 26 95 Email: e.nzabanita@afdb.org Web site: www.afdb.org Private Sector Department African Development Bank BP 323, 1002, Tunis Belvedere, Tunis - Tunisia Tel:+216 7110 3227 Fax:+216 7183 4178 Email: private-sector@afdb.org Web site: www.afdb.org 19