Power Africa Initiative: Details and Benefits for Africa, Investors and the People
During his June 2013 four- nation tour of Africa, the U.S. President Barack Obama inaugurated the Power Africa Initiative. The major objective of the initiative is to set up actions and partnerships that would culminate in the up-scaling of power generation in sub Saharan Africa by as much as 10,000MW and increasing the number of people with access to electricity by 20 million over the next five years.
The initiative is a multi- Stakeholder Partnership among the Governments of the United States of America, Ethiopia, Ghana, Kenya, Liberia, Nigeria and Tanzania. Other level partners include the African Private Sector, African Development Bank, World Bank and some other public and private partners.
It is believed that this up-scaling of electricity in sub Saharan Africa would engender faster rate of industrial development, more employment and better living conditions for more Africans.
What are the details and specific deliverables of this Power Africa Initiative? Who are the other partners? Are they timelines to monitor achievements? And how can African investors, indeed Nigerian investors, participate and benefit from the initiative?
Energy Business Digest presents the details of the Memorandum of Understanding signed between the Federal Government of Nigeria represented by the Honorable Minister of Power, Prof Chinedu Nebo and United States Government represented by U.S. Ambassador, James Entwistle on 24th July, 2014 in Abuja, the capital city of Nigeria.
This spotlight is to avail African investors and businessmen the opportunity to understand the initiative and leverage on the assistance, financial and technical, the U.S. is providing to build and develop Africa’s critical electricity infrastructure in order to foster socio-economic development of our mother continent.
Details of the MoU
The MoU features General and Specific Commitments by both countries.
United States General Commitments include;
A. Through EXIM Bank mobilized $5billion in support of US exports for the development of power projects across sub Saharan Africa.
B. Through OPIC commit $1.5billion in financing and insurance to support energy projects in sub Saharan Africa.
C. Through USAID provide $285million over five years to support Power Africa activities in the involved countries. The break- down of this would include;
I. $5 million contribution to the African Develop Bank, AfDB’s Sustainable Energy Fund for Africa, a multi-donor platform for accelerating private sector investment in renewable energy in Africa as well as providing needed policy support and technical assistance to develop national renewable strategies.
2. $7 million contribution to support geothermal activities, such as the African Union’s Geothermal Risk Mitigation Facility.
3. $3 million to the African Legal Support Facility to provide legal services and legal capacity building to Power Africa host governments to advance Power Africa transactions.
4. Financial and technical support for both on grid and off grid electricity projects through hiring of full time transaction advises.
5. Through OPIC & USTDA provide $20 million in project preparation, feasibility and technical assistance grant to develop renewable energy projects.
Other provisions include funding for analysis of major energy infrastructure investments to achieve successful project financing and implementation as well as provide assistance to help resolve technical impediments to the deployment of power projects and to expedite projects.
Specific Commitments to Nigeria
1. The U.S. Government is to provide in Nigeria the sum of $28 million in support of the power sector privatization, reform of the gas sector and development of renewable electricity generation.
2. Through USTDA provide $3 million in support of gas fired independent power production and modernization of the electricity distribution sector.
3. Provide embedded advisor, other technical support and advisory services to BPE, NBET, FMOP, TCN, etc.
4. Provide regulatory technical assistance to NERC including advisory support, study tours, assessment and internship to support the effective regulation of privatized distribution companies.
5. Provide potential capital expenditure loan guarantee facility for the power sector.
6. Support gas sector reforms and efforts to create and implement a gas flaring reduction strategy.
General and Specific Commitments of the Federal Government of Nigeria
The General and Specific Commitments of the Federal Government of Nigeria include;
1. Implement Tariff Reform: FG to continue with its review of the Multi-Year Tariff Order11 for 2012 to 2017 in order to enhance cost effectiveness, and will consider a rate case review by the new distribution companies for approval.
2. Continue with the liberalization of the Power Sector as contained in the Electricity Power Sector Reform Act of 2005 (ESPR 2005). The Federal Ministry of Power plans to undertake a review of the Act, especially to update it for post privatization issues.
3. Fulfill the Roadmap for the Power Sector Reform adopted in 2010. It is to continue to ensure that accountability and transparency measures that comply with global best practices are put in place.
4. Renew and adopt the Renewable Energy Masterplan produced in 2006 which outlines FG plans to diversify energy sources.
5. Support the newly reconstituted Rural Electrification Agency to implement the Rural Electrification Policy.
6. Review and update the renewable energy feed- in- tariff.
7. Continue to collaborate with the Federal Ministry of Petroleum Resources and Federal Ministry of Environment to prioritize a systemic approach to reduce gas flaring.
8. With the support of Power Africa and other donor agencies continue to develop comprehensive strategy to optimize allocation of gas resources and develop a pricing framework for gas-to power and other users.
9. Seek adequate financing for timely addition of transmission capacity to keep pace with power generation of 20,000 MW by 2020.
10. Continue to monitor the said conditions to determine the earliest appropriate time to commence the Transitional Electricity Market to kick in the contract and rule- based operations.