ENGIE plays the long game in Africa
ENGIE faced a steep learning curve as a first mover in Africa’s renewable energy sector. But the company and its African customers and partners are now reaping the rewards.
ENGIE Africa employs around 4,000 people across the continent from Morocco to Uganda. Many of them work in the off-grid sector, designing and installing infrastructure, and providing services for solar powered mini-grids and individual solar home systems. But ENGIE operates right across the sector, having invested substantially in grid-scale renewables and the expansion of its energy services business.
“Our approach in the last couple of years has been to say: we know Africa is huge and has a lot of challenges, but we can develop the business in a way that makes the most impact, both in terms of bringing economic value to us as a company, and to individual countries and their people,” explains CEO Yoven Moorooven.
That approach has resulted in the creation of a diverse project portfolio, both in terms of project type and geographical distribution, and it is one that is growing fast. ENGIE now has some 3 GW of renewables and thermal generating capacity in Africa and can provide more than 4.5m people with access to electricity. Another 12 GW of capacity is in the project pipeline.
ENGIE has been operating for some years in two of the continent’s most dynamic markets, South Africa and Morocco. In South Africa, its portfolio of wind, solar photovoltaic (PV) and concentrated solar power projects has added some 1.2 GW of capacity. In Morocco, a joint venture with local partner Nareva Holding operates the 300 MW Tarfaya wind farm. ENGIE also operates thermal power plants in both countries.
The growth of interest in renewables on the continent means ENGIE Africa has been able to expand into new markets. ENGIE and its partners inaugurated Egypt’s largest wind farm, the 262.5 MW Ras Ghareb project, in December 2019. In Tunisia, it is working on a 120 MW solar PV project, while in Senegal it is starting construction of two 30 MW solar PV projects. The company has also signed an agreement with the government of Djibouti to build a 30 MW solar PV project there in partnership with Électricité de Djibouti.
On the off-grid side, ENGIE bought home solar solutions pioneer Mobisol in September 2019 to complement its existing Fenix International home solar business and its ENGIE PowerCorner mini-grid business. Moorooven is a firm believer that off-grid renewable energy, in both urban and rural environments, will become an increasingly important partner to utility scale generation in the drive to bring energy access to all Africans, as envisaged in the UN Sustainable Development Goals.
Building on the utility scale and off-grid renewables businesses, the company also runs an Energy Services business that provides installation, maintenance, facility management and other energy services across the continent.
Making a success of these investments has required strategies tailored to the specific market segments. For smaller off-grid developments, that has meant devising what Moorooven describes as a “plug and play” strategy, whereby an approach to scaling up the business is road tested in one African country and, if it works, applied in other countries with suitable operational frameworks.
This strategy has allowed ENGIE to expand its off-grid business for communities and individuals, building on pioneering projects in Uganda and Tanzania with operations in Mozambique, Kenya, Rwanda, Zambia, Benin, Côte d’Ivoire, and Nigeria.
For utility-scale and larger off-grid projects, ENGIE is focusing on establishing activities in a relatively small group of countries with conducive operational frameworks, rather than spreading itself more thinly across many markets where it may be more difficult to get projects done.
“It is important for us to build a stronghold in countries where we have a physical presence. We’ve scaled up our operations in South Africa and Morocco so now we would like to get scale in other countries, such as Egypt and Senegal,” Moorooven says.
ENGIE also adopts a “quick entry/quick exit” strategy. If things aren’t going well in a new market, the company would rather leave and look elsewhere for more productive opportunities than stay for years trying to make further projects work there.
“Like any company, we have constraints on capital and resources, so this is just a good way of doing business,” he says.
Financial sustainability is another central plank of ENGIE’s approach to its African projects. The company believes it is better to invest in projects that are able to stand on their own two feet commercially, rather than those reliant on subsidies for survival.
“It’s not about getting a short-lived win until the subsidies – and probably the business – disappear. What is important for us is that a business is sustainable and profitable over the long term,” he says.
Better business environment
Moorooven is well placed to assess prospects for investment in the African power sector in an increasingly competitive global marketplace. He took over as ENGIE Africa’s CEO in April 2018, having originally joined the company as part of its Global Energy Management team in 2013. His experience before that included stints at Gaselys in Paris and then Macquarie, where he became Head of EMEA Energy Origination in 2010 when he was just 31 years old.
He remains positive on the investment outlook for African renewable energy projects, while expressing caution over the extent to which the impact of the Covid-19 pandemic will be felt in the sector.
“Nobody knows what the full effect will be, but Africa has managed the situation pretty well, when it comes to Covid-19. I think we will see African economies adopting a new normal and working things out,” he says. “The challenge will be to ensure that Africa does not drop down the priority list for external investors, who have fewer financial resources than they did before the pandemic. African projects will continue to need these external investments and African governments may be reluctant even to try to launch major energy projects, if they don’t think enough investors will participate.”
Despite the challenges resulting from the pandemic, he believes the African power sector is still a good prospect for a company such as ENGIE that is seeking to scale up its operations.
“It’s getting better to do business on the continent, and with such a young population, demand is going to grow fast. The business environment is improving by the day,” he says.