May 22, 2015 / 11:21 AM / 4 years ago

INTERVIEW-Italian utility Enel targets Africa as growth market

* Enel plans to build 5 GW of renewable energy in Africa

* Building 1000 MW in South Africa, due in 2 years

* Plans investment in East Africa, geothermal, hydro

* Starace says microgrids are the future of Africa

By Geert De Clercq

PARIS, May 22 (Reuters) - Italian utility Enel plans huge investments in renewable energy and grids in Africa, where it expects to find the kind of growth it has enjoyed in Latin America.

Enel’s chief executive officer Francesco Starace told Reuters that in five years Enel expects to have built up to 5,000 megawatts of renewable energy assets in Africa via its 69 percent owned Enel Green Power unit, which he headed until being appointed Enel CEO in May last year.

He said parent company Enel — which has 96 gigawatts of net installed power capacity worldwide — will also invest strongly in African power grids, which will probably make it Africa’s second-biggest power group after state utility Eskom.

“For us, Africa is the next Latin America,” Starace told Reuters at the Business and Climate Summit in Paris.

“In five years Latin America will no longer be emerging but emerged,” he said, adding that Enel is the largest player across that region in conventional energy, renewables and distribution.

Enel is investing in renewable energy assets in energy-starved South Africa with a balance of 60 percent wind and 40 percent solar.

It also plans to spend heavily on wind, solar, geothermal and hydro energy in Kenya, Tanzania, Uganda, Mozambique and Ethiopia, while participating in a wind tender in Morocco.

Enel will hope to improve on the chequered record of African power projects where governments and utilities have often struggled to maintain new turbines, transformers and power lines.

Those problems are illustrated by efforts to harness the Congo river’s enormous energy at the Inga rapids with a dam large enough to power half of Africa. Years of conflict and misrule in the Democratic Republic of Congo meant the project has never been realised.

Starace noted that Africa needs growth in every kind of energy infrastructure.

Enel’s Africa investments could include some fossil fuel-powered plants, but for now Starace expects most of Enel’s investment will be in renewables and medium-sized hydro.

SOUTH AFRICAN POWER CUTS

Enel also plans an investment in African grids in coming weeks.

“In grids there is huge potential for Africa,” he said.

He declined to give detail, but said microgrids, which connect renewable and other power sources in independent local networks, are the future of Africa.

He said that Europe’s electrification in the early 20th century followed the same pattern, as plants powering factories added lines to supply nearby residential customers.

Eventually, all these small grids were connected to form Europe’s power network.

“I don’t see why Africa should be any different. Maybe only the Soviet Union did it the other way around,” he said.

In South Africa, Enel now operates 10 megawatts and is building 990 MW, which will come online in the next two years.

Eskom, which parted company this week with its chief executive, supplies 95 percent of electricity to Africa’s most advanced economy and is struggling to meet demand.

Asked why South Africa is suffering so many blackouts, Starace said this was due to a combination of an accelerating economy, strong demographic growth and lack of spare capacity.

“Demand growth went out of control. With this peak demand, Eskom embarked on huge plans, but these invariably take longer and more money to complete,” he said.

He said Eskom has launched several tenders for new capacity, open to international bidders and mostly for renewables.

Starace, 59, who replaced longtime Enel CEO Fulvio Conti, has said Enel would invest 18 billion euros over the next five years, more than half in emerging markets such as Latin America and Africa, and double capacity at Enel Green Power.

In Paris, Starace said about 50 percent of Enel’s global investments would go to renewables, about 30 percent to grids, and the rest in conventional generation assets.

“This investment will be 80 percent in emerging markets and 20 percent in mature markets,” he said. (Reporting by Geert De Clercq)

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