Financing power generation & distribution in SSA

Africa is facing a significant challenge when it comes to energy generation, distribution, and transmission. With the lowest electrification rates in the world, the continent heavily relies on fossil fuel power, despite the global push towards greener and more sustainable energy sources. Rapid industrial growth and aging infrastructure systems further complicate the situation. CNBC Africa recently hosted a panel discussion with three experts in the field to delve into how Africa can overcome these challenges through financing, mobilization of capital, and adoption of long-term solutions for the energy sector. Martijn Proos, the fund manager at Emerging Africa Infrastructure Fund, highlighted the impact of the global economic outlook on the energy sector's investment options. Despite disruptions in supply chains, high inflation, and an increase in interest rates, renewable energy remains the most cost-effective solution for many African countries. Proos emphasized the importance of financially structuring projects smartly, leveraging blended finance, and incorporating concessional finance to make energy projects more affordable. On the private sector front, Brian Kelly, the founder and CEO of Virunga Power, stressed the need for resilience and creativity in the face of challenges like fluctuating interest rates and currency losses. Kelly emphasized that moving forward with investments is essential to meet Africa's growing energy demands. He underscored the private sector's role in providing reliable and clean power sources to support the region's development activities. Marco Serena, the Chief Sustainability Impact Officer at Private Infrastructure Development Group, focused on viable financing mechanisms for Africa. Serena highlighted the importance of patient capital, risk-sharing, and using guarantees to unlock local and international capital for energy projects. By utilizing guarantees and blended finance structures, Serena proposed a strategy to navigate the current economic climate and attract investment in the energy sector. The experts also discussed the role of concessional debt and equity in funding energy projects. Brian Kelly noted that a combination of concessional debt, equity, and grants could help achieve development goals effectively. The panel agreed that a mix of capital sources is essential to overcome funding challenges and ensure the sustainability of energy projects in Africa. Moreover, the conversation touched on the need to upgrade Africa's energy grid infrastructure to accommodate renewable energy sources. Martijn Proos emphasized the importance of promoting renewables like wind, solar, hydro, geothermal, and biomass for their cost-effectiveness and sustainability. Proos also highlighted the significance of battery technology in enhancing grid stability and reducing intermittency in renewable energy systems. In conclusion, the panelists agreed that Africa's energy sector faces complex challenges but also presents significant opportunities for growth and development. By leveraging innovative financing mechanisms, blending capital sources, and embracing renewable energy solutions, the continent can address its energy needs sustainably. The push towards green energy and grid expansion will be instrumental in driving Africa's energy transformation and supporting its economic advancement.