Eaglestone Advisory on Africa’s growing renewable energy sector

World Finance speaks to Pedro Neto, CEO and Founding Partner of Eaglestone Advisory, about Africa’s burgeoning renewable energy sector

January 13, 2015

The renewable energy sector in Africa is growing a rapid pace, spurned by technology and local financial acumen. One company at the head of innovation in the continent is Eaglestone Advisory. World Finance speaks to its CEO and Founding Partner, Pedro Neto, to find out more.

World Finance: Tell me about some of the unique investment opportunities that you and your company have identified.
Pedro Neto: First of all, I think it’s good for everybody to understand that in Africa, after all these years of development, we have over 600 million people without access to electricity. And on average, we think that four out of five families don’t have access. And that really is a challenge in terms of getting new ways to improve that.

In the last couple of years, the development of the renewable sector, with advancing technology, was able to change and improve those numbers.

We have been very active in the renewable sector for the last four years. Coming from South Africa – South Africa is really the driver in the sub-Saharan region in terms of renewables. And really this combination of new technology, and the use of renewable resources, really makes the difference.

We are starting to see a strong link and a strong development in Mozambique

Traditionally you see in Africa a combination of gas in the north, hydro resources in the centre, and the south was really based on coal. And really what we needed to do was to change the predicament, try to get slightly away from the coal, because of the environmental issues. But also hydro nevertheless is renewable, has also advantages. And these advantages are in terms of the environmental impact.

So really, betting on the wind and solar has been really a big driver for South Africa, and has allowed South Africa to be a real driver in the region.

World Finance: Now, in developing all of those local projects, did you have the skills base in the countries to be able to develop them?
Pedro Neto: We start with the local developer: people that have the land, made the technological studies, and came up with the idea that it was good to have a windfarm or solar project in that place.

That really has started to create different market niches, in terms of improving the human resources skills. For example, young engineers that come out of university and set up their own companies on the technical side. You can think about construction companies that have really built up new skills – in terms of building up windfarms or solar farms. And you can think about the financing system, where the banks have to really enter into a new stage: about financing new types of projects.

So it has improved a number of skills in different sectors.

World Finance: You have your ambitions, but you can’t make those projects come to fruition without a sound financial regulatory climate. Tell me: did that exist?
Pedro Neto: It’s the largest challenge, always. So we have a sound legal framework, and that on the renewable sector and the energy sector is always a combination of a power purchase agreement. And with an entity that is solid enough to buy, and to give assurance to the banks, to the lending community, that the project will work in the long term.

I think South Africa, after these couple of years, we have now a kind of stable framework. And we see that on this link between South Africa and Mozambique, where people are very comfortable – or seem to be comfortable – in a scheme that we have a PPA between a Mozambiquan company for example, Azcom in South Africa is a buyer of the energy, and the banks, namely the South African banks and international community, are willing to finance on this basis.

So stability is there: that’s the most important thing. People need to believe that the legal framework is stable, and the governments are supporting it.

World Finance: Now you and your company have these ambitions to expand beyond your local markets into the renewable energy sectors elsewhere; can you tell me about some of those local markets?
Pedro Neto: South Africa has been a driver in the region for the next couple of years. We are starting to see a strong link and a strong development in Mozambique. Angola also has plans for the development of its renewables sector. And we are starting to take some initiatives in Rwanda, Zambia, Ghana, Kenya; so, it’s growing.

But it’s growing based on the positive experience of South Africa. That I think is the main driver.

World Finance: Pedro, with such an intimate understanding of the natural resources sector, can you tell me what other sectors are not being tapped effectively in the continent?
Pedro Neto: The next challenge is really the use of the natural gas that we will have a huge quantity available. With the development of Mozambique – Mozambique has discovered the natural gas sector, Mozambique will probably be the fourth largest reserve worldwide. And that really can change the predicament in the region, if you can start to transport that gas to the other countries, and use the gas to transform energy in different ways.

Between the availability of gas in Angola and Mozambique, we really can have a number of new projects in the region in the next few years.

World Finance: And what role is your company going to play in all of this development?
Pedro Neto: We have a team that is really built up around the infrastructure and energy. So really, all of us have done infrastructure and energy projects around the world for the last 20 years. And really, we are trying to build up on the energy producing projects, but also on the pipelines that will be needed to transport the gas on the transmission lines that will be necessary. And all the infrastructures that will be related to these projects – talking about airports, railway, everything that connects to these developments.

And really, we believe that you can see the numbers that are forecast for infrastructure development in Africa are huge. So we expect for the next 10-15 years, the amount of work that has to be done between the sub-Saharan region is fantastic, and will be keeping us in work for a long time.