Economy
Expert Examines Rising Trend Towards Corporate Procurement of Power in Sub-Saharan Africa
Renewable technologies are evolving at a rapid pace and there has been a dramatic decline in the costs associated with its procurement. This provides an opportunity for corporates to reap the benefits of procuring renewable energy directly from generators through the use of a power purchase agreement (corporate PPAs).
Corporate PPAs aim to provide corporates with lower or more stable electricity costs and grid reliability and can contribute significantly to their sustainability targets.
This is according to Mike Webb, Senior Associate in the Banking & Finance Practice at Baker McKenzie in Johannesburg.
He notes, however, that despite these benefits, corporate PPAs have struggled to take off in sub-Saharan Africa, commonly as a result of regulatory challenges. To guide corporates through numerous regulatory frameworks and legal developments governing this sector across Africa, Baker McKenzie’s new report, Opportunities for Corporate Procurement of Power in Sub-Saharan Africa studies corporate PPAs in Ethiopia, Ghana, Kenya, Namibia, Nigeria, South Africa, Tanzania, Zambia and Zimbabwe.
“We have found that the key issue that obstructs the use of corporate PPAs in most of these markets is that a licence is required to either operate a power asset or sell power, or both. Most markets have a threshold where a licence is required, usually ranging between 100kW and 1000kW. Where projects exceed these thresholds, a license is required which can often be difficult to obtain. To overcome this, developers may structure the PPA as a hire-purchase agreement or lease,” explains Webb.
“However, in addition to potentially triggering unfavorable tax consequences (where the PPA becomes a contingent liability on the corporate’s books), these solutions carry enforceability risk and may not pass a lender’s bankability requirements.
“It’s worth noting that there are currently no licence requirements in Senegal and Mozambique and the threshold in Uganda for a licence is 2000 kW,” he notes.
“In addition to licence requirements, most jurisdictions require approval from the local distribution network operator to install an on-site power plant (e.g. rooftop solar PV). This approval can also be difficult to obtain and sometimes gets held up in months of administrative delays,” Webb explains.
Webb says that the good news is that as the energy transition slowly makes its way into sub-Saharan Africa, some utilities and regulators are showing signs of key market reforms that will enable more opportunities for corporate PPAs.
“For example, as of 1 September 2019, Namibia introduced a new energy policy that will allow the bilateral trading of power between generators and customers. In a small power market such as Namibia, the opportunities may be limited. However, it is expected that neighbouring countries, such as Zambia, could follow Namibia in this reform.
“A further key reform required in power markets to unlock opportunities of corporate PPA is net metering, where plants are able to supply unused power into the grid in return for a feed-in tariff. This is not available in most countries in sub-Saharan Africa and where it is available, such as South Africa, the tariff is often too low to enhance the economics of the project,” Webb explains.
Webb notes that as a result of strong resources, as well as poorly maintained and limited grid networks, sub-Saharan Africa has seen an increase in the roll out of mini-grids. Rapid technological development and operational efficiencies have made mini-grids a practical, cost effective and viable solution to electrify rural areas in Africa. The International Energy Agency estimates that at least 40% of new power connections in sub-Saharan Africa during the next decade will be provided by mini-grids. For example, Rwanda plans to provide over 90% of its electricity supply through mini-grids by 2024.
“The regulatory environment around mini-grids in Africa can be quite different depending on the country. Tanzania has fairly clear policies and regulations that favour mini-grids. Nigeria has issued regulation detailing the framework for the establishment of mini-grids. Uganda is currently developing a mini-grid framework with the support of various donor programmes. Similarly, Rwanda has been in consultation with private mini-grid companies in the development of their mini-grid framework,” he says.
Webb notes that a good sign that the power market is maturing is the increase in trading activity in the Southern Africa Power Pool (SAPP) in the last 18 months, which is beginning to show signs of a functional power pool. The SAPP currently serves more than 300 million people and has an available generation capacity of 67.19 GW. A total of 2,124 GWh was traded on the SAPP market during 2018, resulting in USD 106.6 million being exchanged on SAPP’s competitive market. Current operating members of SAPP include Botswana, Democratic Republic of Congo, Lesotho, Mozambique, Namibia, South Africa, Swaziland, Zambia and Zimbabwe. Namibia’s move to allow bilateral trading is expected to extend into the use of the SAPP. As the approval of the relevant utility is required for a person to become a participant in the SAPP, these signs are positive.
“In terms of sub-Saharan Africa countries to watch for corporate PPA opportunities, a recent Bloomberg New Energy Finance report noted that Nigeria, Ghana and Kenya stand out, based on positive economics and relatively accommodating regulatory systems. Senegal, Uganda and Rwanda, with increasing grid tariffs and reasonable momentum in renewable energy adoption, also offer opportunities. However, due to the small nature of the commercial and industrial power demand, the scalability of project portfolios appears to be limited,” he says.
“South Africa, being the most industrialised economy in Africa, is often considered a good starting point for corporate PPA development. Regulatory and policy uncertainty have been the main reasons why adoption has been relatively low. However, continued increases in Eskom supplied grid electricity tariffs has resulted in a notable increase in corporate PPAs over the last 18 months. This is expected to grow further once the Integrated Resource Plan is finalised and regulations are aligned,” he adds.
By Adedapo Adesanya
The Naira fell against the United States Dollar by N1.50 or 0.11 per cent in the Nigerian Autonomous Foreign Exchange Market (NAFEX) to sell at N1,362.05/$1 on Wednesday, June 10, compared with the N1,360.55/$1 it traded on Tuesday.
Also, the local currency lost N4.33 against the Pound Sterling in the official window yesterday to trade at N1,827.33/£1 versus the preceding day’s N1,823.00/£1, and depreciated against the Euro by N1.74 to quote at N1,575.35/€1, in contrast to N1,573.61/€1 of the previous session.
However, at the GTBank forex desk, the Naira gained N3 against the US Dollar to sell at N1,370/$1 versus N1,373/$1, and at the parallel market, it remained unchanged at N1,380/$1.
Updated data from the Central Bank of Nigeria (CBN) showed that foreign reserves surged further due to additional inflows from various sources. Nigeria’s gross external reserves increased to $50.439 billion, its highest level since March 2026, reflecting sustained inflows from oil revenue and other FX sources.
Also, the International Monetary Fund (IMF) has said increased confidence in the Naira, supported by lower and more stable inflation, would encourage households, businesses and investors to hold more local currency assets and reduce reliance on foreign currencies.
The global lender, in a recent assessment, stressed the importance of strengthening the CBN’s operational framework and aligning liquidity management operations more closely with monetary policy objectives.
In the cryptocurrency market, there were recoveries from recent losses as US headline inflation rose an expected 0.5 per cent in May, but the beat on the core rate — which cuts out food and energy costs — pleased markets. The core rate, though, rose just 0.2 per cent in May against forecasts for 0.3 per cent.
The print reinforces the view that the US Federal Reserve will keep interest rates at 350-375 basis points at its June 17 meeting, but is likely to increase rates by 25 basis points by the end of the year.
Cardano (ADA) went up by 2.4 per cent to $0.1647, Bitcoin (BTC) rose by 2.3 per cent to $62,794.09, Binance Coin (BNB) jumped 1.8 per cent to $596.23, Ethereum (ETH) grew by 1.7 per cent to $1,658.12, and Solana (SOL) also soared by 1.7 per cent to $65.23.
Further, Dogecoin (DOGE) appreciated by 1.5 per cent to $0.0849, Ripple (XRP) expanded by 0.4 per cent to $1.11, and TRON (TRX) increased by 0.05 per cent to $0.3218, while the US Dollar Tether (USDT) lost 0.10 per cent to close at $0.9989, and the US Dollar Coin (USDC) declined by 0.01 per cent to $0.9997.
By Adedapo Adesanya
Oil prices jumped early on Thursday as Iran declared the critical energy chokepoint, the Strait of Hormuz, closed after the US launched additional strikes against the Middle East oil producer.
Brent futures rose $1.48 or 1.59 per cent to $94.58 per barrel, and the US West Texas Intermediate (WTI) crude climbed $1.71 or 1.90 per cent to $91.74 a barrel.
Iran’s top joint military command announced the closure of the Strait of Hormuz on Thursday, including oil tankers and commercial ships, saying any vessel attempting passage will be shot at.
Market analysts noted that the renewed escalation in fighting prompted oil prices to rally in early morning trading.
On Wednesday, the US military said on X that commercial ships continue to transit in and out of the strait. It also said no US warships have been struck in the strait, after Iran’s state media reported US ships near the waterway were targeted by missiles and drones.
US forces began launching additional strikes against multiple targets in Iran on Wednesday, the latest in an escalating exchange of attacks that threaten to reignite a full-scale war, which was paused in early April when the two sides agreed to a fragile ceasefire.
Defence Secretary Pete Hegseth held a press briefing announcing further attacks on Iran, saying, “If we need to negotiate with bombs, we’ll negotiate with bombs.” US Central Command later described those attacks as targeting “Iranian military surveillance capabilities, communication systems, and air defence sites across Iran.”
In response to the attacks, Iran’s top joint military command then announced that the Strait was closed to all shipping.
President Donald Trump said the strikes would stop shortly, but that they would continue if Iran’s leaders did not sign an agreement with the US immediately.
Iran’s months-long blockade of the strait, which normally carries a fifth of global oil and gas shipments, has kept oil prices elevated.
The latest exchange of strikes between the US and Iran marks the most significant escalation in the conflict since both countries agreed to a fragile ceasefire in April. Since then, oil inventories have drained dramatically, and no tangible breakthroughs have been announced.
Crude oil inventories in the US decreased by 7.2 million barrels during the week ending June 5, according to new data from the Energy Information Administration (EIA). The EIA’s data release follows figures that were released by the American Petroleum Institute (API) a day earlier, which reported that crude oil inventories saw a draw of 9.119 million barrels in the period.
By Dipo Olowookere
A marginal 0.06 per cent was recorded by Customs Street at the close of business on Wednesday, extending the dominance of the bulls for another trading session.
The uptick printed by the Nigerian Exchange (NGX) Limited was despite weak investor sentiment after reporting 30 price gainers and 36 price losers, representing a positive market breadth index.
Livestock Feeds gained 10.00 per cent to close at N9.35, Deap Capital expanded by 9.86 per cent to N5.35, Abbey Mortgage Bank appreciated by 9.78 per cent to N12.35, Vitafoam grew by 8.25 per cent to N210.00, and FTN Cocoa chalked up 6.54 per cent to finish at N9.45.
On the flip side, Neimeth lost 10.00 per cent to trade at N9.00, International Energy Insurance slipped by 9.92 per cent to N7.90, John Holt shrank by 9.73 per cent to N13.45, Union Homes REIT declined by 8.56 per cent to N70.00, and eTranzact went down by 8.06 per cent to N16.55.
Though activity level contracted yesterday, it remained on the high side, as market participants transacted 1.2 billion equities worth N38.8 billion in 54,193 deals compared with the 1.3 billion equities valued at N57.9 billion traded in 59,956 deals on Tuesday, indicating a shortfall in the trading volume, value, and number of deals by 7.69 per cent, 32.99 per cent, and 9.61 per cent, respectively.
Sterling Holdings sold 565.3 million shares valued at N4.5 billion to emerge as the busiest during the session. FCMB transacted 122.1 million equities for N1.5 billion, Access Holdings sold 49.5 million stocks worth N1.3 billion, Jaiz Bank exchanged 34.9 million shares valued at N313.8 million, and Universal Insurance traded 32.4 million stocks worth N35.6 million.
Business Post reports that the banking and industrial goods sectors respectively lost 0.79 per cent and 0.09 per cent yesterday as a result of profit-taking.
However, the consumer goods index rose 0.42 per cent, the energy counter increased by 0.14 per cent, and the insurance segment improved by 0.03 per cent due to bargain-hunting.
As a result, the All-Share Index (ASI) went up by 154.59 points to 244,852.21 points from 244,697.62 points, and the market capitalisation soared by N99 billion to N157.043 trillion from N156.944 trillion.
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