Windlab targets Sub-Saharan Africa wind projects in response to high investor appetite - Interview with CEO

09 Apr 2014

Global wind power developer Windlab is seeking project opportunities across new markets in Sub-Saharan Africa, the company’s CEO Roger Price told Clean Energy Pipeline in an interview.

Australia-based Windlab has a global development portfolio in excess of 7 GW spread over more than 40 projects, including a significant presence in South Africa, where it has taken two projects totalling a combined 230 MW to financial close. 

Price said the company now aims to target other African markets, where high demand for new electricity generation capacity represents an attractive opportunity for investment in wind, which is cost-competitive with other forms of energy in Africa. 

“We see very significant opportunities for wind in these markets,” he said. “We are well placed to identify the most financially viable sites and we have commenced a programme to do so. We are seeking to explore these opportunities in the next few years.” 

Windlab uses its own proprietary atmospheric modelling and wind energy assessment technology to locate geographical sites with high wind power output potential. It aims to search for potential sites across the entirety of Sub-Saharan Africa, but has already identified the east of the continent as a particularly promising area. 

“The entire eastern corridor from Zambia and Mozambique all the way up to Kenya has a very good wind resource,” said Price. “It is not as abundant as in the lower latitudes of South Africa, but we can identify more capacity than these countries have demand for.” 

Sub-Saharan Africa’s average electrification rate is about 30%, which guarantees continuous long-term demand for new generation capacity. The strength of this demand is counterbalancing the long-perceived sovereign risk surrounding investment in Africa and is attracting interest from international financial investors eager to enter new markets, according to Price. 

“There is increasing appetite for these sorts of assets away from traditional markets, particularly from US and European funds,” he said. “They are seeing some subsidy risk in established markets such as Spain or the on-again, off-again PTC situation in the US, and they recognise that in growth markets where you are meeting fundamental demand you are not subject to political risk that is attached to a subsidy framework. There might be more sovereign risk but there is less political risk.” 

Wind power development in Sub-Saharan Africa can be executed through a variety of avenues. Projects such as the Lake Turkana wind farm in Kenya and Sarreole wind farm in Senegal have secured privately negotiated power purchase agreements with state-owned utilities, while Price also believes some countries could possibly introduce reverse auction schemes similar to South Africa’s REIPPP programme. 

In addition, there are also significant opportunities for private PPAs with off-takers such as resource companies and mining operations. 

Windlab is in the early phase of its Sub-Saharan African expansion, but is confident it will expand quickly once it identifies its most promising locations. 

“We hope to have our first projects reaching financial close in the 2016/17 timeframe,” said Price. “We expect initial projects in these markets to be somewhat smaller than the South African wind farms, but still in the 50 to 100 MW range.” 

Although WIndlab is responding to increasing equity investment appetite for African wind, Price acknowledged that project debt financing from commercial banks is not currently easily accessible in Africa. 

However, he said that other financing sources, particularly multilateral support agencies, will increase the availability of debt for African wind projects. 

“I think there are an increasing number of opportunities in this market for debt financing,” said Price. “The US said it would make $8 billion available for electricity investments in Africa. These sorts of facilities could be used to backstop PPAs and provide guarantees and credit support for financing mechanisms. 

“There are also a number of export credit agencies around the world associated with turbine manufacturers who have the capability to support these projects.” 

Note: Original story was published on http://www.cleanenergypipeline.com. Ronan Murphy (the reporter) is available to contact about this article at ronan.murphy@vbresearch.com.