On August 21, 2017, Power Africa published its 2017 Annual Report highlighting more than 80 Power Africa transactions closed and more than $14.5 billion in financings since its inception. Overall, it has facilitated the financial close of power transactions expected to generate more than 7,200 MW of power in sub-Saharan Africa and generated more than $500 million in U.S. exports. The report demonstrates how Power Africa, and the recently passed Electrify Africa Act, continues to create opportunities for American businesses in Africa as it proceeds toward its goals of increasing installed generation capacity by 30,000 MW and adding 60 million new electricity connections by 2030 on the continent. These developments are important, since interested investors continue to seek access to the $300 billion energy market in sub-Saharan Africa and tap into the demand for an additional 20,000 megawatts in the region.
From August 4-6, President Obama will host approximately 45 leaders from across the African continent in Washington, D.C., for a three-day U.S.-Africa Leaders Summit (the “Summit”). This is the first such event of its kind and is the largest event any U.S. President has held with African heads of state and government. The Summit is intended to advance the administration’s focus on power and investment in Africa. As such, the Summit will focus heavily on the administration’s new Power Africa initiative, as well as the renewal of the African Growth and Opportunity Act (AGOA). These initiatives and pending Power Africa legislation, including the Electrify Africa Act and the Energize Africa Act, are of importance to anyone looking to invest in Africa in the future.
Last week, the U.S. House of Representatives passed the Electrify Africa Act of 2014, approving a plan to bring power to over 50 million Africans and further open the door for U.S. investors in the continent's development and growth.
The Electrify Africa Act, which mirrors many aspects of the Power Africa initiative unveiled last year by President Obama, aims to make government-backed credit more accessible to the private sector in order to deliver access to energy for more than 50 million people in sub-Saharan Africa. This important development could help interested investors access a $300 billion energy market in sub-Saharan Africa and tap into the demand for an additional 20,000 megawatts in the region.
On February 27, 2014, the House Committee on Foreign Affairs passed H.R. 2548, the Electrify Africa Act, to improve access to electricity in sub-Saharan Africa, through a comprehensive U.S. government approach to electricity projects in the region. The bipartisan legislation would establish a U.S. strategy to support affordable, reliable electricity in sub-Saharan Africa in order to improve economic growth, health and education in Africa, while helping job creation in the United States through greater exports.
The main purpose of the Electrify Africa Act is to make government-backed credit more accessible to the private sector in order to deliver access to energy for more than 50 million people in sub-Saharan Africa. This important development could help interested investors access a $300 billion energy market in sub-Saharan Africa and tap into the demand for an additional 20,000 megawatts in the region.
(Houston, Washington and New York) – Today, members of Akin Gump’s global energy and transactions group provided a briefing for members of the media that included a look forward to U.S. and global trends in energy production in 2014.
The panel comprised energy regulation, markets and enforcement practice co-head Suedeen Kelly, energy partner Stephen Davis, London partner and Moscow partner in charge Sebastian Rice, global project finance practice co-head Adam Umanoff and financial restructuring partner Ira Dizengoff. The briefing was moderated by Rick Burdick, chair of the firm’s global energy and transactions group.
Ms. Kelly discussed distributed generation (DG)—“electric generation that’s connected to the distribution system as opposed to the transmission system,” in her definition, based in small generators typically but not exclusively owned by electric customers rather than utilities. She noted that it has the potential to be a game-changer for the electric industry, taking market share away from traditional electric utilities. She pointed to five factors driving DG’s growth: its affordability, customer empowerment, reliability, environment and efficiency, and new market opportunities in the face of stagnant electricity demand.
A sluggish economy, a desire to cut back on the use of coal-powered electricity, and a worldwide focus on new oil and gas recovery techniques have pushed the South African government to take steps toward diversifying its energy industry and developing its natural resources using best practices from around the world. This week, the South African Department of Mineral Resources took a step towards achieving this goal.
Oil and gas E&P activity in South Africa is fairly limited, as evidenced by the fact that the country relies on imports to meet nearly 95 percent of its crude oil requirements, according to the South African Department of Energy.1 This situation, however, is not due to a complete lack of resources. Exxon Mobil Corp.; Royal Dutch Shell Plc and the South African, state-owned PetroSA have interests in the mostly undeveloped 15 million barrels of proven oil reserves located in the south of the country and in varied waters offshore.2 With the vast majority of South Africa’s energy needs being covered by locally produced coal (28% of which is exported), incentives to develop oil and gas resources have been lacking until now.
To accomplish the goal of safely developing its oil and gas resources, and thus adding these resources to its energy portfolio, the South African Department of Mineral Resources has released proposed regulations to augment existing gaps identified in the current oil and gas E&P regulatory framework, with a particular emphasis on hydraulic fracturing.3 These regulations were released on October 15, 2013, and the South African Department of Mineral Resources is accepting public comments on them until November 14, 2013.
On June 14, 2013, the High Court in London ruled that Heritage should pay Tullow Oil c.$313 million under the terms of a tax indemnity relating to the 2010 transaction that saw it acquire Heritage oil licenses in Lake Albert, Uganda.
The litigation centered on Heritage’s Ugandan capital gains tax (“CGT”) liability arising from that transaction. Heritage realized c.$1.45 billion from the sale and the Ugandan government raised a CGT assessment of c.$434 million, calculated as broadly 30 percent of the transaction value. Heritage disagreed with the amount and paid the Ugandan government only $121.5 million, departing Uganda shortly afterwards.
Originally, the dispute was to be resolved by arbitration and $283 million of the purchase price was placed in escrow pending the conclusion of the dispute. In addition, Heritage paid $121 million to the Ugandan government as a ‘refundable deposit,’ to be returned should the arbitration go in their favor.
With forecasts that the total GDP of emerging markets could overtake that of the developed economies by 2014,1 and at a time where technological advances are transforming the energy business globally, it is easy to see why emerging market energy project explorers and developers (EMEPED) are so excited about their prospects. Since the advent of the global commodity boom in 2000, many emerging markets have experienced substantial growth the growth, creating tremendous potential for investors with long-term investment horizons. At the same time, investing in emerging markets has become increasingly more complex and challenging. One of the emerging market risks expected to become more difficult to manage in the coming years will be the labor challenge.
The demand for highly skilled, highly educated and a highly experienced workforce to implement energy projects is intensifying, and leading to labor shortages in developed economies. Such shortages are amplified in many emerging markets where a workforce skilled in energy matters is often non-existent. Expatriated employees are often utilized to help lift projects off the ground in such markets, but are not always be able to satisfy all such labor demands. Without sufficient skilled labor, risk of an adverse health, safety or environmental incident increase substantially. Going forward, an EMEPED’s success in an emerging market will depend upon its ability to solve labor constraints.