Chinese light givers
Chinese energy companies continue to expand across Africa, bringing infrastructure and power to regions needing both
About 50km upstream of the mouth of the Congo River, and 225km southwest of Kinshasa, a project is proposed that will supply enough power to meet much of the demand in southern and central Africa. Priced at $5bn-12bn, the Grand Inga Stage III expansion will be the biggest hydropower contract in the world, adding 44 gigawatts of capacity in six phases.
If Chinese companies win the bid over two other consortiums, no one will be surprised. It would simply underline the country's domination of greenfield hydropower projects in Africa between 2010 and 2020.
China Three Gorges Corporation and Sinohydro certainly have the firepower to pull off the project too.
State-owned banks-including the likes of Exim Bank-will put up cash; such low-priced funds lie behind much of the rapid expansion into Africa by China's power companies.
Between 2010 and 2015, Chinese companies operating as the main contractor were responsible for adding 30% of all new power capacity in sub-Saharan Africa as they swept up greenfield power projects. More than 150 projects have been completed in the last five years and at least another 50 are under construction or approved and securely financed.
It's hardly a shock. Africa has been a main target for Chinese energy firms' expansion in the past few years. In a recent study, the OECD laid this bare. Between 2010 and 2020, Chinese contractors built or are engaged in building 17GW of generation capacity in sub-Saharan Africa, equivalent to 10% of installed capacity.
Although Chinese contractors dominate hydropower, they have spread throughout the electricity mix, including renewables, a sector where it has developed 56% of new capacity.
Among plants was a biomass project in Ethiopia, a 600-megawatt coal-fired plant in Botswana, the 400MW Bui Dam in Ghana, a 100MW diesel-fired power plant in Niger, the 244MW wind farm in Northern Cape, South Africa as well as geothermal projects in Kenya, plus national and cross-border transmission lines.
It's been an impressive feat. Recent and current Chinese-built transmission and distribution projects have added-or will add-at least 28,000km of electricity lines. This includes projects like a new 500-kilovolt line running from the Gibe III dam between Ethiopia and Kenya, under construction by the State Grid Corporation of China.
Between 2010 and 2015, Chinese companies operating as the main contractor were responsible
for adding 30% of all new power capacity in sub-Saharan Africa
In Western capitals, all this has caused alarm about China's geopolitical ambitions in Africa. But in regions that have often been starved of energy, Chinese efforts have certainly helped; and Chinese money has filled a void left by other international investors.
"China has become an important source of financing in Africa," says the OECD report. "Chinese engagement in power covers all primary sources except nuclear, and all sizes of projects, while donors from OECD countries avoid financing large hydropower dams or coal-fired power plants."
Generally, Chinese contractors base projects on locally available resources. For instance, nearly 75% of new coal-fired capacity is in coal-rich southern Africa, while most new Chinese-built projects in West Africa are fuelled by gas, which is locally plentiful. In Nigeria alone, Chinese companies have completed three gas-powered projects totalling 1.5GW.
Although Chinese contractors dominate hydropower projects-they've added 20 dams since 2010 and are constructing nearly 20 more-they aren't dominating right across the energy sector. Of coal-fired projects, Chinese firms are behind just 27%. For oil-fired plants, it's a quarter.
But they have picked the plums. "The share of greenfield power projects contracted by Chinese companies equals those contracted by companies from the next four largest countries combined: France, Italy, Finland and the United States," notes the OECD's report.
Contrary to general belief, only 10-20% of China's energy projects in the region are designed to provide power for the resources sector, such as the 600MW Morupule B coal-fired plant in Botswana. The rest add capacity for the broader economy.
Chinese state-backed loans, from giants such as Exim, have fuelled the expansion, giving domestic contractors a price advantage. In the past five years, says the OECD, China has pumped around $13bn into the sub-Saharan energy sector alone in the form of direct loans, buyer/seller credits and foreign-direct investment (FDI). The flood of FDI has coincided with a drying-up of big-ticket projects at home, especially coal-based ones.
Predictably, the dominant Chinese operators are state-owned. The big five-Sinohydro, Gezhouba, China National Electric Engineering, China International Water and Electric, and Shandong Electric Power Construction-have grabbed 75% of the projects.
Sinohydro has done best of all: it now generates nearly 40% of its overseas revenue from Africa. By 2020, Sinohydro will have in just 10 years completed 24 projects with a total capacity of 3.8GW, not counting several transmission and distribution contracts.
The company has had more than its fair share of controversy, notably with the 400MW, $0.622bn Bui Dam on the Black Volta River in Ghana's Bui National Park, where residents had to be relocated. Bids on the expansion of the Grand Inga Dam have been delayed because of similar concerns.
But this hasn't sated China's appetite. Nuclear energy could be next. As China develops the technology, it is already preparing the ground through formal understandings with countries such as Kenya.