PEi: In your role heading up ABB’s business activities across sub-Saharan (Southern and East) Africa, what is driving your company’s particular interest in the region at this time?
|CP: We want to be in Africa for many reasons, but here are just a few headline facts: Africa is forecast to have GDP growth at a rate twice that of the rest of the world, it has 30 per cent of the world’s mineral resources, it has a fast growing population and currently 600 million people still have no access to electricity. We are seeing a steep increase in population growth and in GDP growth across the region.|
PEi: What extent of this growth do you see being in the electricity sector?
CP: Figures produced by the Energy Information Agency predict power generation capacity doubling by 2035 across Africa. Rehabilitation will see investment of $4 billion by 2015, new transmission and distribution (T&D) about $10 billion and new power generation $12.5 billion over the same period. When it comes to access to electricity, the average is around 15–17.5 per cent and even less if you just take sub-Saharan Africa.
PEi: What are some of the key factors driving this growth?
CP: The mining and minerals industry, as well as the oil & gas sector are looking at massive growth in the coming years. Capital expenditure in these sectors is expected to be $35 billion up to 2015 and these industries rely for the most part on electricity from the grid. Without grid connection, these projects are not viable. ABB is involved in building infrastructure to enable power to reach these mines, for example.
PEi: What is ABB’s strategy in approaching business in this region?
CP: Our intention is to work from our existing hubs in Egypt and South Africa to focus on the ten countries where we see the best potential in power infrastructure, usually driven by investment in oil & gas. These countries are Angola, Cameroon, Democratic Republic of Congo (DRC), Kenya, Mozambique, Nigeria, Ghana, Senegal, Tanzania and Ivory Coast. Of course we are in other African countries as well, including projects in Namibia and Botswana in recent years, but the ten countries mentioned above are where we see the best prospect of investment.
PEi: How do you plan to operate out of these two hubs?
CP: We have established a strong foundation in Egypt and South Africa from where we can service the two African sub-regions (Southern and Central). We have local production and engineering centres, providing resources to neighbouring countries which we can supplement with high-tech imports from our European operations and cost-competitive technology from India and China.
PEi: How does Africa compare to other parts of the world in terms of business opportunities?
CP: If you take Africa, excluding the Maghreb, we have achieved orders of around $1 billion a year. Going forward, we expect ABB in Africa to produce growth faster than the ABB Group as a whole. By 2015–2016 we would target to double the annual order intake from present levels.
PEi: What do you see as the main challenges to this vision of business opportunities?
CP: Outside of the two hub countries, I believe the two main challenges will be financing and skills. The projects we are working on are often complex long-distance transmission lines using sophisticated technology and local utilities currently rely on international consultants to bridge the knowledge gap.
PEi: To what extent is energy efficiency an issue in Africa?
CP: In South Africa, for example, Eskom has a big drive for energy efficiency and last year they placed a big first phase order with us to replace or upgrade most of the motors and variable speed drives in their power system. Motors and machines are areas where utilities can really make a lot of efficiency savings. Also, big industrial customers who use a lot of electricity will be looking at ways to improve efficiency and reduce carbon emissions either by reducing power consumption or to produce more with the same amount of electricity.
PEi: Just referring now to South Africa, what prospects do you see for independent power producers (IPPs)?
CP: The question for IPPs up until now has been a lack of clarity in policy but this is likely to be resolved fully soon. The department of energy recently received 53 expressions of interest for renewable energy project bids, representing a potential capacity of more than 2000 MW – so we see a huge interest. There is also interest from big customers planning independent power projects in conventional power generation, either building their own or seeking outside investors. Sasol has bought a number of gas turbines and is producing power using its own gas, whereas Anglo American is working with investors to invest in power for their own mines. On a smaller scale we also see the sugar industry interested in ethanol plants.
PEi: Do you see any issue with access to the grid for IPPs?
CP: The government will produce its policy document on this early this year, and then it will be up to them and the regulator to make sure investors in the power sector are comfortable with the rules for grid access. Although Eskom owns all the transmission and distribution assets, the government is its principal shareholder so the decision will be out of its hands.
PEi: How do you foresee the prospects for meaningful amounts of wind and solar power generation across Africa?
CP: If you exclude the Maghreb, few African countries have enough wind resources to sustain big investments, whether it is onshore or offshore. In South Africa you do not have long periods with wind and the coastal depths make offshore more challenging. In solar however, South Africa is already planning a 1500 MW development near Upington and that is just the beginning. In addition to this, you will see a number of private investors coming into solar and I can see significant solar power capacity being added over the next 20 years. We see good prospects for CSP [concentrating solar power] in the region and have experience in Spain and Germany we can point customers to.
PEi: Where else can South Africa expect to get its power from?
CP: There is a huge debate about nuclear. I would not rule out South Africa adding another 8000–10 000 MW of nuclear power in the next 20 years or so as it seeks to maintain its position as the powerhouse of the region. It has no more hydroelectric resources to exploit so any hydropower would need to be imported from neighbouring countries, but South Africa has been asking itself the question as to how reliant it wants to be on other, potentially unstable countries? Either way, South Africa needs to build the capacity equivalent to a new Eskom in the next 20 years.
PEi: How do you see ABB contributing to this growth?
CP: There are huge opportunities in Africa. ABB is really making a difference here. We are linked with the big steps that Africa is taking, for example the HVDC link we built in the DRC, and are currently upgrading, was the first one in Africa. The first HVDC Light project in Namibia was executed by ABB, we have done two small solar projects for Eskom and the first big mine in Mozambique was electrified, with the DCS from ABB, so we are everywhere there is big investment.