Imports of West African crude oil by Asian refiners and end-users have reached 1.69 million barrels per day (bpd) this month, up 10 percent from September and at a record high for October, data compiled by Reuters showed on Monday.
A Reuters survey of trade and shipping sources shows refiners in China, India, Indonesia and other Asian countries have bought a total of 55 cargoes of West African crude oil for loading this month, up from 50 cargoes in September.
Barring a sharp and unexpected decline in Asian imports from West Africa during November and December, 2012 will exceed the previous annual average record of 1.71 million bpd set in 2010, the data show.
Blackstone Group LP, the world’s biggest buyout firm, plans to start investing in energy projects in Africa worth $3 billion amid increasing demand for power on the continent.
Blackstone plans to invest in the 360 to 480-megawatt Ruhudji hydropower plant in southern Tanzania through its Sithe Global Power LLP unit, David Foley, senior managing director of New York-based Blackstone, said yesterday in an interview in Kampala, the Ugandan capital. It will also invest in Rwanda’s 150-megawatt Ruzizi hydro project that will supply power to neighboring Burundi and the Democratic Republic of Congo.
“As the demand for power increases in Africa, Blackstone together with Sithe has a number of projects,” he said. The projects are in the “early stage negotiation and development phase.”
Africa has 15 percent of the world’s population and accounts for only 3 percent of energy consumption, according to a 2011 report by the African Union and other continental organizations that studied power markets demand over the next three decades. Demand for electricity is projected to increase by 5.7 percent annually from 2.4 percent, it said. The percentage of Africa’s population without access to electricity is 59 percent, compared with 21 percent in developing nations in Asia, according to the study.
Blackstone will invest in hydropower and geothermal projects, Foley said. The company declined to comment on project costs.
Ugandan Hydropower
Sithe and Industrial Promotion Services Kenya Ltd., an affiliate of the Aga Khan Fund for Economic Development SA, jointly own Uganda’s $900 million 250-megawatt Bujagali hydropower plant, which reached full capacity in July. Uganda’s government, which contributed $20 million, is a minority shareholder in the project, which is being inaugurated today.
“All projects are different, but Blackstone typically seeks to form public-private partnerships like we did with Bujagali,” Foley said
The construction of Bujagali, which is Blackstone’s biggest energy investment in Africa, began in May 2007, and replaced the nation’s reliance on 100 megawatts of thermal power, while eliminating a power deficit of 170 megawatts, according to Blackstone.
Equity financing by shareholders accounted for $200 million of the funding and the rest came from lenders including the International Finance Corp., the African Development Bank, the European Investment Bank, the German Development Bank and the French Development Bank.
The Ugandan plant, located 80 kilometers (50 miles) east of Kampala and run by Bujagali Energy Ltd., will be transferred to the government for a token $1 after 30 years, Foley said.
The International Finance Corp. expects to invest at least $4.3 billion in sub-Saharan Africa in 2013 with a focus on energy and transportation, said Jin-Yong Cai, executive vice president and chief executive officer.
That’s an increase from a record $4 billion put into the region this year, he said in an interview in Dakar, Senegal’s capital, yesterday.
The World Bank’s lending unit aims to be “the key facilitators or catalysts for private-sector development which is the fundamental driver for economic growth,” said Jin-Yong, a former Goldman Sachs Group Inc. partner who was appointed to the IFC post in August. “Africa is our priority globally,” he said.
The IFC has invested across the continent this year, from a hotel in Burundi to power projects in Kenya. Growth in the region of 840 million people is forecast at 5.4 percent this year and 5.3 percent in 2013, outpacing global projections, according to the International Monetary Fund.
In Senegal, where electricity shortages caused riots in 2011, key impediments to economic growth include the cost and supply of energy, Jin-Yong said. Senelec, the country’s national power utility, has debts of 150 billion CFA francs ($294 million), according to a company report.
Economic Bottlenecks
“I don’t know any other places where the electricity price is so high, but even with that high price the supply is not sufficient,” he said.
Jin-Yong met with Senegalese government officials to discuss areas where investment can improve growth.
“We are looking at several key sectors, not only private- sector participation, but to fundamentally deal with some of the key bottlenecks in this economy.”
The IFC also plans to invest in agribusiness and transportation, Jin-Yong said. “Unless you have decent infrastructure, you can’t have scale, and if you don’t have scale, you can’t really achieve any competitiveness in the business,” he said.
Six sub-Saharan African nations including Angola and Kenya may each raise at least $500 million in debut foreign bond sales in the “next few years” to fund infrastructure spending, Moody’s Investors Service said.
Rwanda, Tanzania, Uganda and Mozambique may also sell their first foreign-currency bonds, setting a benchmark yield for companies, including state-owned ones, that may want to borrow from overseas markets, Aurelien Mali, a senior analyst, wrote today in an e-mailed report.
“There is significant potential in Africa for the increased use of international capital market finance,” Mali said. “International debt issuance will likely be led by the region’s sovereigns, driven by the need to finance a portion of their infrastructure needs.”
Economies in sub-Saharan Africa excluding South Africa, have traditionally been more reliant on selling securities maturing in two years or less in domestic markets, which are often less liquid than developed ones, as well as sourcing donor aid, commercial bank loans and private credit, he said.
That’s changing as international bond sales over the past year by Namibia and Zambia, which were oversubscribed by five times and 20 times respectively, highlight that investors’ appetite for riskier, higher-yielding debt is rising, he said.
Even still, “funding via international debt securities, albeit growing, will likely remain a limited portion of gross capital inflows to the region,” Mali said.
Infrastructure Spending
Inadequate road networks, power generation and water supplies shave at least two percentage points off sub-Saharan Africa’s economic growth annually, according to the World Bank. Infrastructure development in the region requires an estimated $93 billion a year of investment to overcome capacity shortages, the Washington-based lender said on its website.
Thirteen of 54 countries in Africa have issued foreign- currency denominated debt on international markets, Mali said.
Overseas debt issuances from African nations have been hampered by the fact that some have no sovereign credit rating, are contending with political instability or lack the resources to go through the process, he said.