EFG Hermes is eyeing investment in North Africa’s renewable energy sector as countries diversify their energy mix to plug their power shortages.
Karim Moussa, the head of private equity at EFG Hermes, said that the Egyptian investment bank was looking to further build “investment vehicles for greenfield developments in Egypt and the rest of North Africa”.
Egypt, in particular, needs an overall investment of more than US$70 billion in its power sector over the next seven years to meet rising demand, according to the country’s energy ministry, with demand expected to grow at 5 per cent annually.
“The electricity demand is soaring due to rising living standards and economic development, while the existing power infrastructure is considered to be insufficient to fulfil demand,” Mr Moussa said.
There has been a sizeable increase in private equity firms’ involvement in the green energy sector across the globe, according to the United Nations Environment Programme. The volume of private equity investment climbed by 20 per cent to $1.7bn last year compared with 2013, while buyouts more than tripled to $2.5bn in the same period.
Mr Moussa said North Africa represents a prime opportunity for EFG as it looks to expand on its large direct investment platform present in Europe, known as Vortex, without identifying potential targets.
The first deal under Vortex was with the acquisition of a 49 per cent stake in EDPR France, which has a wind portfolio of 334 megawatts.
“The investment has paid so far around €20 million [Dh77.6m] in dividends and is expected to pay a net cash yield of over 10 per cent to its shareholders in its first year of investment in 2015,” Mr Moussa said.
Vortex plans to build a diversified cash yielding renewable portfolio in excess of 1,000MW over the coming three to five years.