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Expert opinion
22 March 2023

African renewable energy market gets massive boost

Middle East & Africa
Strategic acquisition of Lekela Power by Infinity Group allows for economies of scale and potentially a massive boost for renewable energy projects across African continent.

The announcement at the beginning of this week that Infinity Power had completed the acquisition of 100% of renewable energy company Lekela Power is good news for the sector across Africa, a continent which, perhaps unsurprisingly, has to date been relatively slow to get larger scale renewable energy projects off the ground.

The hope is that this strategic corporate consolidation will provide increased impetus for not only more projects, but allow for greater economies of scale within some of the continent’s 54 countries where there are proper frameworks in place to develop in particular solar and wind projects.

Infinity Power Holdings BV is a joint venture between Egypt’s Infinity Group and Abu Dhabi-based Masdar, and with this acquisition of the entire shareholding of Lekela Power it now becomes the largest renewable energy company on the African continent. This acquisition deal is also believed to be the largest renewable energy deal to date within Africa.

Other key stakeholders in Infinity include Africa Finance Corporation (AFC) and the European Bank for Reconstruction and Development (EBRD). In terms of scaling up, this will be important going forward. Lekela currently operates 1GW of wind power projects in South Africa, Egypt and Senegal - the largest portfolio of operating renewable assets across the continent, and it also has a 1.8GW project pipeline, which are in various stages of development.  

The acquisition finance was structured by mandated lead arrangers and lenders Absa Bank Limited and the Mauritius Commercial Bank. Buyer of record is Infinity Renewables Energy BV (a 100% subsidiary of Infinity Power Holdings). None of the parties have yet revealed the overall cost of the transaction, which was funded through equity investment from shareholders and debt. However, it is understood that the acquisition transaction is valued at an enterprise value of approximately $1.5 billion. Cantor Fitzgerald, Absa, Norton Rose Fulbright, Al Kamel Law, Ernst & Young and AFRY advised Infinity Power on the transaction. 

Law firm Bracewell (UK) acted as international counsel to the lenders. The firm notes that: “This was a unique and innovative financing that combined project, acquisition and structurally subordinated holdco finance structures with South African rand and dollar denominated debt, and a portfolio of companies and assets located in South Africa, Egypt, Senegal, Mauritius and the Netherlands.”

London partner Tom Jamieson, who co-led Bracewell's team on this financing, added: “We are delighted to have worked with the lenders and sponsors on what is undoubtedly a landmark transaction for the African power sector.” The structure of the deal is a first-of-kind transaction for the African renewables market. 

Importantly, Jamieson also tells TXF: "This is a watershed moment: it marks a changing of the guard with a seismic shift from international to 'intra-African' investment in the power sector, coupled with the use of financing structures which have previously been limited to the more mature renewables markets."

Looking ahead

With the acquisition the operational portfolio of Infinity Power now stands at 1.3GW and overall the company says it has a strong project pipeline of 13.8GW. The company says this transaction delivers on Infinity Power’s COP27 promise of being the fastest growing renewable energy company in Africa, and also describes itself as one of the world’s fastest-growing clean energy companies.

Commenting on the acquisition, Mohamed Ismail Mansour, chairman of Infinity Power, said: “Having successfully finalised the Lekela acquisition, we will build upon this milestone to reach our target of installing and operating 2GW of greenfield projects by 2025. We continue to drive efforts that reduce carbon emissions, increase renewable energy sources, and develop efficient energy solutions for the entire region, in order to achieve our vision of providing clean, reliable and affordable electricity access to people in underserved communities across Africa.”

Nayer Fouad, CEO at Infinity Power, also stated: “The acquisition has the potential to bring much needed stability in power supply to African countries that are facing energy insecurity. This is a major step forward for Africa's future, and a significant move in enabling the shift towards sustainable energy, providing a more stable and secure source of power for its citizens.”

Pointing to the potential of enhanced economic development, Mohamed Jameel Al Ramahi, CEO, Masdar, noted: “This landmark acquisition of Lekela Power will position our Infinity Power joint venture as the market leader in Africa, and is also recognition of the continent’s tremendous renewable energy potential. Greater access to clean energy will enable African nations to develop their economies sustainably while meeting their climate objectives – in alignment with COP28’s goal of delivering inclusive climate progress.” 

While Chris Antonopoulos, CEO of Lekela, added: “We can already see that the backing of Lekela’s new investors, Infinity Power, will make our next chapter an exciting one. We remain committed to delivering clean, reliable power for communities and countries across Africa. To do this we are growing our pipeline, exploring new technologies and will continue to create positive impact for the communities where we operate. 

According to the International Renewable Energy Agency (IRENA), Africa’s installed renewable energy capacity is set to grow from 54GW in 2020 to more than 530GW by 2040, with solar PV growing to 340GW, and wind rising to 90GW. Increasing renewable energy resources will also drive energy access, with almost half of Africa’s population still without access to basic electricity.

As noted above, the backing of multilateral investors AFC and EBRD in Infinity Group will be increasingly important as the company strives to deliver planned projects. And, it will be an important element for other investors – whether banks, ECAs or private investors - coming in with additional finance on specific projects.

Samaila Zubairu, president & CEO of AFC, commented: "In order to address Africa's energy crisis in a sustainable and climate responsible manner, the African private and public sectors must work in collaboration with global strategic partners, and the recent acquisition of the largest renewable energy asset in Africa is a significant milestone towards this goal.” 

He also added: “With this acquisition, we emphasise the importance of utilising steady and affordable power from abundant natural sources to drive a quantum leap in both the scale and diversity of energy solutions. This achievement positions AFC, working with our partners, to establish a 3GW renewable energy platform, accelerate Africa's instrumental role in reaching global net zero, and build the foundations upon which value addition, industrialization and economic growth on the continent will emerge." 

Nandita Parshad, managing director of the Sustainable Infrastructure Group, EBRD, said: “EBRD is proud to be part of this strategic transaction, which is expected to unlock growth opportunities in Egypt and beyond. The acquisition of Lekela Power marks a significant milestone for Infinity Group, paving the way for the company to capture ample opportunities in the energy space in Africa, delivering clean and sustainable energy to the continent.” 

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