In this edition, we give the Trinity view on the Nigerian elections and in our main article this month, we investigate the potential for nuclear energy in Africa.

Closing

We have closed a number of deals in recent months including:

• Acting for ARM on the acquisition of the entire issued share capital of Mixta, a real estate developer focusing on opportunities across Africa; and

• Acting for CDC on its $15,000,000 million investment in Africa-focused agricultural production company, Miro Forestry, a sustainable timber business which operates in Sierra Leone and Ghana.  The investment was made in conjunction with a further investment by Finnfund.

New instructions

We have had a number of new instructions in recent months, including advising on:

• the financing of three solar PV projects in South Africa;

• the development of a solar PV project in Mozambique;

• the development of a gas IPP in Ghana;

• the financing of an agri-business in Bangladesh;

• the financing of a hotel in Ethiopia; and

• the development of two solar PV projects in Uganda.

Speaking Engagements / Conferences 

• Partners Kaushik Ray and Patrick Leece spoke at the IFLR Africa Forum in London in May 2015.

• Trinity will be at the Africa Energy Forum in Dubai from June 8^th to 11^th 2015, where Senior Partner Paul Biggs will be moderating at the Access Co-development Fund, a live Dragons Den style competition for early stage project investment, enabling four shortlisted projects to pitch for up to US$5m of development finance which will be awarded, live, during the forum in Dubai.

Getting in touch

As ever, if you have any comments or questions about Trinity, about Focus, or generally, please get in touch.

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For those who expected chaos, the Nigerian election of 2015 flattered to deceive. In a contest of firsts, President Jonathan quickly conceded defeat to General Buhari, marking the first occasion on which the incumbent in a Nigerian election has been evicted from office by popular vote. General Buhari’s inauguration took place last week in Abuja. At the time of writing, there has been little unrest related to the presidential election result and the process of transition has so far been relatively smooth. There has, however, been violence in Rivers State in relation to the gubernatorial election, with 55 APC members reported to have been killed. In some senses the election and its aftermath were arguably more important for the message they sent out about the prospects of democratic reform across the continent. Although it is still early days, commentators have remarked that this election result will send a signal to some of Africa’s more authoritarian regimes that pressure for democratic change cannot continue to be ignored. Observers on the ground representing the European Union commented that they believed the election had been broadly free and fair.

General Buhari faces a daunting workload. Despite its oil riches, Nigeria’s wealth gap remains significant, with large proportions of its population surviving on less than two dollars a day. The fall in the oil price seen during late 2014 and early 2015 continues to have an impact on the economy, with the Naira having devalued recently. Corruption remains a major problem, one which General Buhari has pledged himself to overcome, stating that “if Nigeria does not defeat corruption, corruption defeats Nigeria.

Outgoing President Jonathan’s record on tackling corruption was widely seen as poor, with such embarrassments as the claim by the President of Nigeria’s Central Bank, Lamido Sanusi, that the Nigerian National Petroleum Company had failed to account for over US$20 billion in oil revenues, which arguably contributed to loss of his post shortly afterwards. On top of all these problems, the Boko Haram insurgency in Northern Nigeria remains a threat to the country’s security and stability, although recent military action against the group has seen the release of large numbers of Nigerians previously kept prisoner.

Leading Africa’s biggest economy and its most populous nation, a fledgling democracy endowed with substantial natural resources but riven by widespread poverty, religious division and corruption cannot and will never be an easy task. Time will tell whether General Buhari is up to the task that has been set for him by Nigeria’s electorate. Goodluck Jonathan was perceived by some as a relatively capable administrator who was in the right job at the right time, but not the leader that Nigeria requires to move onto the next stage of its development. General Buhari’s presidency will likely take place against a backdrop of a continuing fall in Nigeria’s oil production (which remains by far its most important export, forming 94% of exports in 2013), with 2013 output being 1,754,000 bpd, down from a peak of 2,440,000 bpd in 2005. A long road may lie ahead, but Nigeria has taken an important first step towards greater transparency by holding a free and open election, the results of which were unchallenged.

In terms of the way forward, Nigeria’s power sector remains key: load shedding and lack of available grid power is strangling both industry and individual consumers alike. Fortunately for General Buhari, there are a number of well-developed independent power projects (including the Azura 450MW IPP in Edo State), which require a final push from government in certain key areas before they can reach financial close. To say the opportunities have been handed to the new government on a plate may be overstating it but in Trinity’s view, some joined-up thinking at government level can deliver some fairly swift and concrete results in terms of evidencing delivery by the government in certain key areas, including the power sector. Other sectors, including ports and road infrastructure, are similarly poised to reap the rewards of a new and eager government.

Nigeria’s time has come to deliver on the promise of its potential for the entire population and we at Trinity look forward to being part of that journey.

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The potential for Nuclear Energy in Africa

Bringing electricity to every home in Africa is one of the greatest challenges of our age. The question is whether nuclear power has the potential to make a contribution as part of a diverse energy strategy. According to Africa Development Bank figures, an estimated 60% of Africans 620 million people are not connected to the grid. In rural areas, electrification can be as low as 10%. 70% of businesses struggle with an unreliable electricity supply. With the continent’s population rising towards 2 billion, matters will only become worse if the challenge is not faced. [1]

The case for moving away from a dependence on tradition fossil fuels is compelling. According to Chapter 9 of the IPCC Report, Africa is one of the most vulnerable continents to Climate Change and this is exacerbated by existing developmental challenges such as endemic poverty, complex governance and institutional dimensions; limited access to capital, including markets, infrastructure and technology; ecosystem degradation; and complex disasters and conflicts. [2]

Moreover, air pollution is a major threat to public health, particularly around South Africa’s ‘coal belt’. According to a Greenpeace Report, it is estimated that 2,200 to 2,700 premature deaths are caused each year by the air pollution emissions from Eskom’s coal-fired power plants, including 200 deaths of young children. [3] The growth of wind and solar power on the continent such as the Lake Turkana Wind Power Project and the Kalkbult Solar PV project in South Africa (on both of which Trinity advised) is encouraging.

However, renewable energy does have its limitations. Wind power only produces electricity when it is windy; solar power only during the day. Hydropower also has great potential but not during Africa’s frequent droughts. Nuclear energy has the advantage of being carbon-free and constantly available regardless of the climate. And while nuclear may have higher costs than other forms of energy, it takes less uranium to power a nuclear power plant than coal to power a coal-fired power plant: 25 tonnes of uranium produces the same amount of electricity as 2.7 million tonnes of coal. Africa has its own uranium supply. Namibia has 10% of the world’s reserves, first discovered in the Namiba Desert in 1928. [4] Niger has 7.5% of the world’s uranium reserves. [5]

Nuclear science has the potential to create other industries and economic opportunities. Radioactive material can have scientific uses in medicine. Americium, which is produced as part of the nuclear decommissioning process, can be used in smoke alarms and in Space technology. Accordingly, Africa’s nuclear energy industry has shown signs of growth in recent years. Last year, Pretoria and Moscow signed a deal in respect of eight Russia-designed VVER reactors in South Africa providing 9,600 MW of capacity with the first 1,200 MW reactor coming on line in 2023. In June 2012, Rosatom signed a memorandum of understanding to “prepare a comprehensive program of building nuclear power plants in Nigeria” including the development of infrastructure and a framework and system of regulation for nuclear and radiation safety. Russian financing options will be available to Nigeria, whose preferred option is a build-own-operate (BOO) arrangement with majority Rosatom equity. Early in 2015, the intention was to have a first unit on line by 2025, and 4,800 MWe operating by 2035. Rosatom has signed similar agreements with the Ghanaian government. Egypt, Senegal, Uganda and Kenya have also made moves to develop nuclear energy. [6]

Developing nuclear energy does come with numerous challenges: it requires a highly skilled and specialist workforce which, if not home-grown, would need to be imported. Nuclear plants take a long time to plan and build so they are no ‘€œquick fix’ solution to electricity shortages. Nuclear plants last, on average, 60 years but it takes some 20 years to earn back the investment. As a long term solution, they require political stability which can be elusive in many parts of Africa. Furthermore, they need a tough regulatory regime covering safety and security issues in order to protect against disasters and that can be a challenge in nascent democracies.

Finally, there is the need to have a strategy for the nuclear waste and this requires a solution that will last for thousands of years for the lifespan of radioactive isotopes. This final challenge is even eluding such advanced economies as the UK. Without proper strategies in Africa’s emerging economies, the risks of nuclear radiation could very well outweigh the benefits of a secure electricity supply, and potential investors may want to take their money elsewhere. Many of the state-owned power plants in virtually every African jurisdiction are in a poor state (or are non-operational). This has resulted from a failure to make the required investment in the maintenance of those plants and a lack of suitably qualified staff.

The Trinity view is that unless the public sector is able to reverse this longstanding trend, the rationale for nuclear assets that are owned by or eventually transfer to the government is a challenging one.

Endnotes:

[1] AfricElec Africa Power Monitor 20 May 2015, pp.5-6

[2] https://www.ipcc.ch/pdf/assessment-report/ar4/wg2/ar4-wg2-chapter9.pdf

[3]http://www.greenpeace.org/africa/Global/africa/publications/Health%20impacts%20of%20Eskom%20applications%202014%20_final.pdf

[4] http://www.world-nuclear.org/info/Country-Profiles/Countries-G-N/Namibia/

[5] http://www.world-nuclear.org/info/Country-Profiles/Countries-G-N/Niger/

[6] http://www.world-nuclear.org/info/Country-Profiles/Others/Emerging-Nuclear-Energy-Countries/

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