Capital Markets

American PE targets energy projects with Sh5.5bn fund

Solar power panels

A solar energy specialist explains to customers how solar LED street lighting works. PHOTO | NMG

American private equity fund Everstrong Capital wants to raise Sh5.5 billion ($50 million) from institutional investors targeting infrastructure projects in Kenya and Africa.

The fund dubbed the Kenya Infrastructure Fund will focus on energy, water, ICT, transport and healthcare sectors, and is targeting projects within three years of financial close.

Everstrong Capital expects to close the first round of the cash call by March 2021.

“We are in the middle of the fundraising and have had a successful 12 months talking to local and international investors, where we have received a number of commitments. We expect the first close in the first quarter of next year,” said Mr Henry Kyanda, a managing director at Everstrong.

The fund has a bias towards energy projects and owns Milele Energy, an independent power producer that will develop, own and operate power-generation facilities from both renewable—solar, wind, geothermal, hydroelectric—and conventional fuel sources.

Everstrong Capital, which has offices in the US, Kenya and South Africa, also owns Gulf Power, an 80-megawatt thermal power-generation facility near the Athi River in Nairobi launched in 2014.

Kenya’s energy sector has been open to independent power producers (IPPs) since the 1990s attracting billions of shillings worth of investments.

Energy investment in the country has however been dogged by limited transmission and distribution network, opaque procurement and way leave disputes that delay projects leading to spike in construction costs and tender variations.

Being capital intensive and risky, the Government has had to guarantee private players with the electricity distribution monopoly Kenya Power leveraging its long track record as a credit-worthy off-taker.

US firms have been looking at investments in the energy sector, largely riding on the Power Africa initiative that was launched in 2013 to gain market share for their companies in the sector.

Since then Power Africa and its partners have helped increase off-grid connections and have helped bring an additional 477 megawatts of new power generation.

The American investors are targeting to add up to 5.45 million new connections, both on and off-grid, and 2,100 megawatts of new generation capacity by 2023.