After passing both houses of the US Congress unanimously, the Electrify Africa Act of 2015 has been signed into law by President Barack Obama.
The law’s enactment builds on and provides Congressional backing for the Obama Administration’s Power Africa initiative, launched in 2013, and demonstrates broad bipartisan support for a comprehensive US policy encouraging power sector development and increased access to electricity in sub-Saharan Africa. That policy will support a US role in facilitating and removing barriers to private financing and public-private partnership (PPP) structures as tools to develop power projects in the region, which should provide opportunities for investors, sponsors and lenders to advance their projects.
Interested parties should note that the law requires the President to submit a multiyear strategy for implementation of the law’s objectives within the next six months.
Goals of the law
The law adopts as US policy the goals of providing first-time access to power for at least 50 million people in both rural and urban areas of sub-Saharan Africa by 2020, and enabling the installation of an additional 20,000 megawatts of electricity by 2020, using a broad variety of power generation options. The law is neutral as to energy source and supports an “all of the above” approach to power project development, including oil, natural gas, coal, hydroelectric, wind, solar, geothermal and other sources of power, as well as energy efficiency and improvements to distribution and transmission systems.
In addition, the law seeks to promote policies to facilitate PPPs and private financing, to allow participation in power markets by independent power producers (IPPs), and to encourage in-country power sector legal and regulatory reforms in the areas of production, delivery and distribution, pricing and transparency.
The law declares that the US will partner with governments of sub-Saharan African countries, international financial institutions, regional economic communities and the private sector to meet these goals, and to implement monitoring and evaluation mechanisms to increase accountability and efficiency.
Requirements for the President
The law requires the President to submit to the US Senate Committee on Foreign Relations and the House Committee on Foreign Affairs, within 180 days of the law’s enactment, a report outlining a multiyear strategy for reaching the objectives of the law. No later than three years after the enactment of the law, the President must submit a progress report to the same Senate and House committees.
No expansion of US governmental agency authority
The law directs the US Agency for International Development (USAID), the US Trade and Development Agency, the Overseas Private Investment Corporation (OPIC), and the Millennium Challenge Corporation to, “as appropriate, prioritize and expedite institutional efforts and assistance to facilitate the involvement of such institutions in power projects and markets, both on- and off-grid, in sub-Saharan Africa and partner with other investors and local institutions in sub-Saharan Africa, including private sector actors, to specifically increase access to reliable, affordable, and sustainable power in sub-Saharan Africa…” The President is permitted by the law to establish an interagency working group to coordinate efforts among US governmental agencies and to implement the strategy required by the law.
The law does not expand or alter the mission or budget of any US governmental agency. The original bill, introduced by Senator Bob Corker (R-TN) and co-sponsored by a bipartisan group of senators, included sections amending certain provisions of the Foreign Assistance Act of 1961 related to OPIC. Among other provisions, the original bill provided a temporary three-year authorization for OPIC to: (1) make direct loans to “eligible investors” under Section 234(c) of the Foreign Assistance Act of 1961 for power projects in sub-Saharan Africa, up to a total amount of $50 million for all such loans; and (2) to issue local currency guarantees under Section 234(h) of the Foreign Assistance Act of 1961 to African subsidiaries of foreign financial institutions if the issuance of such guarantees directly facilitated lending for power projects in sub-Saharan Africa by eligible investors. These provisions, which would have expanded OPIC’s current authority to participate in financing power projects in sub-Saharan Africa, are not included in the enacted text of the law.
To learn more about the Electrify Africa Act, Power Africa, and our extensive experience in energy and infrastructure development projects and financings in Africa, please contact any of the authors.