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Dangote Partners Blackstone, Carlyle in U.S. $5 Billion Energy Deal

August 6, 2014

Nume Ekeghe

Africa's richest man Aliko Dangote has gone into partnership with Blackstone Group LP and Carlyle Group LP, the world's two biggest private-equity firms, to invest in energy infrastructure in Nigeria and Africa.

"They want to invest heavily," Dangote said in an interview with Bloomberg news. They couldn't really find a local partner to work with and you are not going to move down here and sit here and make sure it is done, because you are doing business all over the world," he added.

There have been reports that the federal government was considering offering gas fields to power sector investors to boost electricity generation and end chronic power shortages in the country.

Dangote said in the interview that he struck separate agreements with the private-equity firms to invest a combined $5 billion by 2019 with New York-based Blackstone in power projects.

It is estimated that Nigeria needs an annual investment of $3.5 billion to achieve its generation capacity target of 40,000 megawatts by 2020. Nigeria's, current peak grid power generation stands at about 3,849 MW with a per capita electricity usage of 136 kilowatt hour (KWH).

This compared with an average per capita electricity usage of 4,803 KWH in South Africa, which generates about 41,000mw. Blackstone will commit half of the $5 billion in the next five years, with the remaining $2.5 billion coming from Dangote Industries Limited.

"We can change people's way of life, increase economic growth, and I think we will do very well for our investors too," Blackstone's chief executive officer, Steve Schwarzman said.

Schwarzman said he expects returns from the Dangote venture to be in line with those produced by leveraged buyouts. Blackstone's private-equity funds produced internal rates of return after fees of 16 percent as of June 30.

Dangote Industries and Blackstone would search for projects through Black Rhino Group, an African infrastructure developer in which Blackstone invested.

Blackstone has done $25 billion globally in deals known as Greenfield, in which it constructs operational facilities. Carlyle which raised $698 million for its first sub-Saharan Africa fund, counts Dangote among its limited partners.

The International Monetary Fund (IMF) projects 7.3 per cent growth for Nigeria in 2014, up from 6.4 per cent last year. However, the country could sustain double digit growth rates if daily power shortages were to come to an end.

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Source: AllAfrica

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