Private financing for independent power transmission projects in Africa

Gridworks and Electricidade de Moçambique have teamed up to launch an Independent Power Transmission project in Mozambique, enriching energy access and stability in the region. Chris Flavin, the Interim CEO of Gridworks, joined CNBC Africa to shed light on mobilizing private financing for such projects across Africa. This collaboration marks a significant milestone in the transmission sector in Mozambique, particularly focusing on the Chumura-Nakala line phases two and three, which will enhance connectivity between the central and northern regions of the country. The joint development agreement between Gridworks and EDM will govern the subsequent phases of development, leading up to the financial closure and commissioning of the infrastructure. The discussion delved into the emergence of Independent Transmission Projects (ITPs) as a promising asset class in Africa compared to the established Independent Power Production market. While the power generation sector has been a go-to for private investors over the past few decades, the ITP model is still in its infancy on the continent. Flavin highlighted the disparity in funding between the power generation and transmission sectors, with the overwhelming majority of private capital gravitating towards power generation. This lopsided trend has created a financial burden on African governments to finance grid expansion, thereby underscoring the urgency for private sector investment in transmission projects. Flavin elucidated on the challenges faced by private investors venturing into transmission projects, particularly emphasizing the hurdles encountered during the project development phase. While transmission investors find resemblance in risk profiles and credit enhancement techniques with the power generation sector at the financial closure stage, the project development phase presents unique obstacles. Delving into regulatory aspects, Flavin acknowledged the regulatory frameworks in place across African markets but emphasized the need for further streamlining to expedite the execution of ITPs. The discussion touched on the significance of pilot projects in catalyzing regulatory enhancements and market development. The conversation pivoted towards the vast potential of private sector investment in independent transmission projects in East Africa, underscoring the critical role of transmission infrastructure in bolstering energy access, economic development, and renewable energy integration. Flavin accentuated the substantial funding requirements for the transmission sector to achieve government targets, citing figures from the World Bank and AFDB that underscored the pressing need for additional investments in the sector. The discussion concluded on a hopeful note, highlighting the immense opportunities for both private sector investors and governments in leveraging private financing models like ITPs to bridge the funding gap in the transmission sector. The collaboration between Gridworks and Electricidade de Moçambique stands as a testament to the transformative potential of private financing in bolstering energy infrastructure across Africa. As the continent embarks on a journey towards energy security and sustainability, initiatives like the Chumura-Nakala line underscore the pivotal role of independent transmission projects in reshaping Africa's energy landscape.