Greenfield investment continues, but M&A drops
The Africa and the Middle East power and utilities (P&U) sector saw less M&A in Q3 but greenfield investment continued, particularly in renewables where installed capacity is forecast to accelerate. Investors in this market are prepared to take additional risks for higher returns.
In Africa, projects supported by institutions, such as the World Bank, are particularly attractive. In one example, in September, the World Bank awarded the Mozambique Government a grant of US$150m to upgrade its electricity network. Across the Middle East, governments are encouraging private investment, particularly in renewables.
Q3 2017 transactional highlights
- Greenfield investment in solar continues, including Dubai Electricity and Water Authority awarding a US$3.9b contract to build and operate a
700 MW solar power plant to a consortium comprising Shanghai Electric and Saudi Arabia's ACWA Power.
- Japan is active in the region, with the country signing a letter of intent with the African Development Bank to invest US$6b in supporting universal power access in Africa by 2025. Read more in Matt Rennie’s blog.
- European investors continue to diversify in Africa, with the quarter seeing investment from Norwegian players in sub-Saharan African countries.
Deal value in Africa and the Middle East region (2010–Q3 2017)
Africa and the Middle East installed renewable energy capacity historic and forecast growth to 2018
Top five Africa and the Middle East deals (Q3 2017)
M&A capital outlook and investment hotspots
- Investment in greenfield renewable energy continues, as Zimbabwe Power Company plans to invest US$570m in solar and Dangote Industries join with Black Rhino Group to build a US$150m 100 MW solar plant in Nigeria.
- Kuwait to increase generation capacity to 32 GW (from current levels of 15 GW) by 2030. In early 2018, the country is expected to issue a tender to construct a US$1.2b solar power plant.
- Investment in microgrids to emerge, with analysts estimating that the Kenyan market will be worth US$1.5b through 2022.
- Kenya targets electrification, aiming to provide its entire population with power by 2020.