The Obama Administration's Power Africa initiative creates business opportunities for non-US companies seeking to engage in the power sector within Africa. While there is the assumption that the initiative is limited to US companies, there are in fact very real opportunities for international companies to benefit from Power Africa.
Indeed, in many ways, it is implicit that Power Africa must envision participation by non-US firms. The sheer size of needed investment in power infrastructure in sub-Saharan Africa -- estimated at $300 billion to provide universal access to electricity by 2030 -- is far greater than any one country can attempt to take on alone. Further, the deployment of the needed capital assumes a global effort, with active participation by many different players, including other international development and aid agencies, host government agencies, other donor countries and non-US power and construction firms. This array of participants is consistent with the way lending and credit support are managed by the participating US government financing bodies.
As we noted in "President Obama Announces Power Africa Initiative," published on July 15, 2013, the Power Africa program is designed to catalyze private investment and incentivize host governments to accelerate development in Africa's electricity sector. One key aspect of the initiative is the commitment of $7 billion over five years to power and transmission projects through US government partner institutions: the Overseas Private Investment Corporation ("OPIC", up to $1.5 billion),the US Export-Import Bank ("US Ex-Im", up to $5 billion), as well as USAID, the US Trade and Development Agency, the Millennium Challenge Corporation and others. According to USAID, since Power Africa's launch in June 2013 the initiative has catalyzed some $14.7 billion in commitments by private sector investors.
Non-US companies seeking to tap the financing, insurance, technical assistance and grant tools offered by the Power Africa implementing agencies need to be aware of the conditions imposed by such agencies. Because Power Africa agencies will provide funding in accordance with their standard regulations and procedures, the finance and insurance products offered by US agencies such as US Ex-Im and OPIC will only be available to those companies that meet the conditions with respect to US ownership and sourcing, inter alia.
Identifying the best routes for non-US companies to find opportunities within Power Africa requires a clear understanding of the varying conditions among the agencies and how proposals can be structured in line with these conditions. For example, companies organized outside of the US can qualify for OPIC financing so long as more than 50% of the firm's equity is owned by US shareholders. Joint ventures and consortia which have at least one qualifying firm can then structure their project investment so as to meet OPIC conditions by, for example, ensuring that the qualifying firm's equity contribution is sufficient or by engaging US firms to provide goods and services to the project up to a requisite amount.
Another avenue for non-US companies alongside the Power Africa initiative is through other governmental or multilateral institutions, such as the African Development Bank, with whom Power Africa officials are engaging in order to leverage financial and technical resources available to support power projects. This collaboration is not just theoretical: Power Africa's flagship project, the Corbetti geothermal plant in Ethiopia, is a US-Iceland joint venture which obtained a risk mitigation facility funded by KfW, the German development agency.
Last, but by no means least, are the opportunities that will arise in Power Africa host countries for participants who would be necessary partners in the design and delivery of the power projects spurred by Power Africa.
In sum, we encourage non-US companies not to overlook the potential to participate within or alongside the Power Africa initiative. Power Africa holds forth the prospect of providing a tremendous boost to the power sector in sub-Saharan Africa, not only in the six countries initially identified for funding in the initial announcement of the program but in other sub-Saharan countries as well, such as in the Democratic Republic of the Congo to help finance the massive Inga 3 hydroelectric project. Further, Power Africa assumes that US and non-US companies will continue to form joint ventures or other arrangements to develop energy projects within existing US funding guidelines.
At Dentons we have the largest energy practice of any international firm coupled with a deep commitment and extensive experience in Africa. Our capacity to integrate international and local expertise is invaluable in power sector projects that draw on our legal, regulatory, financial and government relations experience.