Investment Opportunity: Ivory Coast Electricity, Water Monopoly Could Be Ending

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Written by Dana Sanchez

Open markets in electricity are rare in Africa, and even rarer in water, but that’s exactly what Ivory Coast President Alassane Ouattara is demanding — a move he said will lower skyrocketing prices for consumers and businesses, Bloomberg reported in MGAfrica.

In francophone West Africa’s largest economy, power producers are struggling to keep up with growing consumption, according to Reuters. Economic growth has averaged around 9 percent for the past four years and electricity demand is rising by 10 percent a year.

The industry needs $20 billion of investment in the power sector over the next 15 years, the energy minister said in 2015.

Ivory Coast exports electricity

Electricity coverage in Ivory Coast is high by regional standards at almost 60 percent of the population, according to the World Bank, and the country is a regular exporter to some neighbors, FinancialTimes reported in September.

“It has an outstanding power sector,” said Christophe Jacquin, regional head of operations for U.K. power generation group Aggreko, which operates a thermal power plant in Ivory Coast. “It is best in class in West Africa.”

Electricity distribution in Ivory Coast is controlled by Cie Ivoirienne d’Electricite, or CIE, a unit of Eranove SA which is 56 percent owned by private equity firm Emerging Capital Partners and 19 percent by Axa SA, according to its website. Eranove also has a stake in the country’s water distributor, Societe de distribution d’eau de la Cote d’Ivoire, or SODECI, Bloomberg reported.

Eranove has been doing business in Côte d’Ivoirefor for several decades. It has also done business in Senegal since 1996; in the Democratic Republic of Congo since 2012 and Mali since 2015 . Proceeds from ordinary activities in 2014 amounted to $519 million US in 2014.

Emerging Capital Partners is a Washington, D.C.-based pan-African private equity firm focused on investing across Africa including Francophone Africa. AXA is a Paris, France-based insurance firm that engages in investment management and other financial services.

“We must end the monopoly of CIE and SODECI,” Ouattara said in an address Sunday to Ivorians via government-owned TV Radiodiffusion Television Ivoirienne. “I’m calling on all who wish to invest in this sector to do it so we can have a healthy competition that will allow to control the prices and bring the cost of electricity down.”

“I’ve asked the prime minister to plan for a distribution of electricity by many companies,” Ouattara said. “It’s when we’ll have several companies that the prices will go down because distribution is too expansive.”

Eranove operates an installed electricity capacity of over 1100 megawatts in Ivory Coast, according to a company press release. That’s more than half Ivory Coast’s power production capacity.

The country plans to double its power production capacity to 4,000 megawatts by 2020, Bloomberg reported.

The government decided in June to increase electricity prices by 16 percent, staggered over three years to keep pace with production costs, according to Reuters.

Electricity prices were scheduled to increase by 5 percent in January. But some customers saw rates rise by as much as 40 percent, according to a government investigation. That prompted Ouattara to cancel the January increases and call for a more competitive industry.

Eranove has supplied electricity to the Ivory Coast since 1990 under an agreement with the government that expires in 2020.

Ouattara did not say how utility markets will be liberalized or if it can be done before the agreement ends in 2020, Reuters reported.

Foreign electricity operators in Ivory Coast say the country has developed and maintained a regulatory framework for the power sector that has encouraged investor confidence, FinancialTimes reported:

Luc Ayé, managing director at Azito Energie, an independent power producer, says a key to success is a defined set of rules for how CIE has to pay the independent power generators. A “waterfall” structure gives independent power producers a relatively high place in the payments queue.

“That allows transparency in the sector and all the operators know that we are going to get paid. It is the basis for everything that has made Côte d’Ivoire attractive for investment. It has never been called into question,” Ayé says, adding: “There are very few countries that have such a clear organisation and structure.”