Energy: Denham Capital to Invest $250 million in Nigeria

Denham Capital Management LP, a London-based private equity firm, plans to invest at least $250 million into gas-fired and renewable power in Africa through Themis Energy.

“We work in emerging markets where there’s a real need for more power; Africa is a great example of this, there is so much capital looking for good projects in Africa. It’s definitely a seller’s market.” said Scott Mackin, head of Denham’s power team.

Denham Capital also established a partnership with Neo Themis, a power supplier based in Casablanca, Morocco. It’s currently developing about 400 megawatts of renewable energy and gas-fired projects across Africa and seeks to have 1 gigawatts under construction by 2019.

Projects in the works include a 44 megawatts of hydropower in Ivory Coast and a 50-megawatt solar plant in Nigeria. They are also seeking to have projects in Kenya and Madagascar in the near future.

“Africa is a great example of an emerging market, there is so much capital looking for good projects in Africa. It’s definitely a seller’s market,” Mackin added.

Laird Reed, Senior Investment Manager at IFC Asset Management Company, illustrates the drivers behind the rise in power demand in emerging markets

“As countries grow from low-income to middle-income and the middle class starts growing, the very first thing people do is start buying appliances, televisions, more lights and bigger houses; these are all driven by power,” Reed said.

With the public utilities that dominate the sector in many emerging economies unable to keep pace with current electricity consumption patterns, let alone future demand, the need for increased private investment in the sector is clear.

Nearly 1.3 billion people in developing economies still lack access to electricity, and demand for power in non-Organisation for Economic Co-operation and Development (OECD) markets is expected to grow more than three times as fast as in the developed world through 2035, according to the International Energy Agency.

“Despite increased competition, the number of projects reaching closing is still largely below the needs of the continent and this new venture is well positioned to fill the gap,” said Tas Anvaripour, CEO of Neo Themis.

Denham’s strategy is to avoid markets with high subsidies and without government support, seeking opportunities in between these two extremes. It has won projects in renewable energy auctions in Brazil and South Africa recently and is generally looking to lock in long-term contracts for power sales.

The private equity firm has invested almost $1 billion into electricity projects to date across Europe, Latin America, Asia and Africa. It has sold 6.5 gigawatts of energy assets with over 70 per cent in renewables, typically exiting through sales to strategic buyers such as utilities and other energy companies. SunPower Corp. and SunEdison Inc. are among the companies that have acquired projects from Denham in the past.

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