Access to Africa
Reda El Chaar of Dubai-based Access Power has his eye on Africa's renewable energy development.
It’s been a whirlwind two and a half years for Reda El Chaar, the founder of Access Energy Group. The company made its name as an advisor on some of the biggest independent power projects (IPP) in the Middle East, but now the fledgling outfit has embarked on a very different course, albeit one that was part of the plan from the very beginning.
“A year and a half back we started to realise the initial vision that we were set up to do, which is to become a developer and eventually an owner and operator of power assets in the Middle East and Africa,” says El Chaar, who previously worked at Saudi-based giant ACWA Power, where he was responsible for devising and executing its renewable energy strategy.
During his near four years at ACWA, the company won a number of big renewable projects, including the 160MW Concentrated Solar Power (CSP) project in Ouarzazate, Morocco, as well as one of South Africa’s first CSP projects. Since his departure that strategy has seen ACWA continue its winning streak with a number of other big contracts, most notably the 200MW development of Dubai’s solar park.
It seems hard to reconcile the notion of being an advisor on many of the largest conventional power projects in the Middle East with becoming a developer of small scale renewable projects in Africa, but El Chaar insists that Access can continue to juggle both balls.
“The idea was for this company to eventually evolve into becoming a developer of smaller to medium sized power projects while maintaining a strong hold on the large scale IPP/IWPP advisories as well,” he says. “In the last two and a half years we still managed to advise on more major IWPPs in the MENA region.
“But of course it doesn’t make sense for a company like ours to be involved in those on the development side, because this is an arena for large utilities and it is already very well served, and possibly even crowded I would say,” he explains. “Our interest is to go for the less well served market which is the smaller sized projects that obviously cannot be developed by huge utilities just because of the burden of overheads.”
The Dream Team
Access aims to create a $500mn portfolio of smaller sized assets and recently boosted its chances by announcing a new alliance. The company has formed Access Infra Africa (AIA) in partnership with France based EREN, with a view to becoming a developer, owner of operator of small scale renewable projects in Africa.
The joint venture came about because of an alignment between the strategies of both companies, El Chaar explains. “EREN is now setting up to become one of the world’s largest owners and operators of renewable energy assets,” he says.
“They want to look at markets that are not saturated with renewable energy, that still present opportunities, and markets in which renewable energy makes economic sense, which are not necessarily waiting for subsidies to be announced. If you combine those two, then Africa becomes one of the most obvious places where those two strategic directions meet.”
Lack of funding, whether it be debt or equity, is not the main barrier to developing these kinds of projects in Africa, El Chaar says. Until recently the bigger problem was a lack of experienced developers to take projects to a point where they are construction ready and bankable. EREN came to the same conclusion and began to seek out an experienced partner.
“We develop from the early origination stage - conceptualising the project with the government and sometimes private clients as well – all the way to the construction ready stage, so of course we deliver the element of experience and capability and access to the market,” El Chaar says.
“Once the projects are ready for construction, Access Infra Africa will continue to hold up to 30% of the project equity over the long term and EREN, through one of its affiliates will continue to hold 70%.”
Small to medium sized renewable energy projects are a good fit for many parts of sub-Saharan Africa right now because of the current state of power infrastructure in the continent. Larger scale projects, El Chaar says, present too big a challenge for the grid and would need another six or seven years before the transmission and distribution infrastructure could transport that kind of power.
“In the long run we want to be involved in larger projects, but in the meantime we want to fill a very important gap. There are many places across Africa where there is sufficient grid infrastructure to do smaller to medium sized projects,” he explains.
“I’m speaking about PV power plants of 10 to 50MW and wind power projects of between 30 -100 MW. By doing that you are able to work within the constraints of the grid and realise your projects in a faster way.”
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The money is there
Though raising finance can often be a real struggle for small projects, El Chaar says there’s a major trend from multilateral donors trying to create more facilitated, standardised processes to deal with smaller projects because they realise the urgent need for them.
Donors such as FMO, the Dutch Development Bank, have been very successful in doing smaller size projects and the lending community is starting to respond to the need for deploying a higher volume of smaller sized projects.
Access describes itself as technology agnostic, believing that aligning itself with one type of renewable power source or a single provider would hamper its key vision. “In certain places PV makes more sense than wind.
In others you might want to go for a hybrid solution of diesel plus some renewable element,” EL Chaar says. “Being technology agnostic gives us the ability to optimise our offering on a project by project basis.
“We are delivering a service to the host government which is buying electricity from us. We have a vested interest in making sure that whichever technology we apply is reliable and will remain able to deliver competitively priced electricity up to the end of the PPA term, which is around 20 years.”
El Chaar believes that the recent drop in oil prices is one of the best things to happen to renewables. The price of oil was even lower in 2009 than it is now and in the intervening years reached all-time highs. That kind of volatility makes a 20-year power project more financially risky, he says.
“Any African government planning its energy mix based on oil or fuels that are priced against oil is really committing an unforgiveable mistake,” he says. “With wind and solar I’m able to give you a fixed price per kWh for 20 years, or even 40 years if you want. It’s stable. So we see renewables as the perfect complement to diversify the energy mix and make it a less risky mix financially.”
Though Access Infra Africa will mainly targeting projects in sub-Saharan Africa, the company also has its eyes on what El Chaar describes as the “next frontier in renewable energy in the Middle East and North Africa”. Egypt is looking to develop 4,300MW of wind and solar power capacity from its first renewable energy round and Access is in the mix for 200MW of solar PV and 100MW of wind power.
“Egypt’s renewable energy programme is long awaited,” El Chaar says. “It’s one of those countries where renewables could play a very economic role within the energy mix. We are looking forward to taking a meaningful chunk of the market.”