MACIG Connect Series
CONCO benefit from the shortage of electric power throughout Africa by offering a large suite of power generating options, especially in renewables.
Could you provide an overview of CONCO?
CONCO’s main focus is to deliver electrical infrastructure across Africa. We do everything from full EPC for renewables power plants, as well as electrical balance-of-plant for all power plants, with our core business being substations and overhead lines, as well as protection & automation systems. With ZAR 4 billion turnover p.a., the group is also listed on the JSE stock exchange. Although South Africa is our home market, our company has diversified extensively into Africa over the last few years, and close to half our revenue comes from projects outside of South Africa. We have undertaken projects in 21 African countries, and a few in the Middle East, currently focusing on Ethiopia, Tanzania, DRC and Ghana. Our focus tends to vary as governments invest in energy infrastructure, at which point there is generally a two- or three-year program.
Renewables is expected to become a major contributor to our business portfolio in line with the increasing focus within Africa. Although South Africa is the flagship for renewables projects, other countries, such as Kenya, also have programs for procurement. The growth of CONCO Power Projects is approximately 20% per year, and will continue as Africa continues to invest in energy infrastructure.
Interest in renewable energy is increasing globally. What are the key drivers for renewable energy in Africa?
The most exciting thing is seeing electricity generated by renewables projects becoming competitive with grid prices, and significantly cheaper than thermal plants such as diesel and heavy-fuel-oil. This is a major game changer globally, and for the first time there are clear financial motivators alongside sustainability drivers. The uncertainty associated with grid and fossil fuel pricing also makes renewables projects more appealing as the pricing is fixed for the lifetime of the project. Equally, if the price of storage decreases as quickly as predicted, within five to ten years it will be possible to build a solar battery system with exactly the same quality of supply as a diesel system, but with a lower energy price. Alongside the financial benefits, there are also a number of sustainability and community advantages.
The main challenge is that in renewables projects in a sense involves the purchase 20 to 25 years of energy up front, and thus the off-take of that electricity needs to be long term for the financial model to work. This is the key challenge in the mining space, as many projects have an uncertain lifetime, and the renewables power plants typically require at least a ten-year power purchase agreement or longer. A reduction in the contract time increases the price, and then the investment doesn’t seem as financially rewarding. The main driver for the adoption of renewables in the mining sector will therefore be an increase in commodity prices. Mines will adopt renewables into their projects as companies begin to feel more comfortable that they will be around for a longer time.
In South Africa there is a large amount of competition from European companies, for example. What gives CONCO a competitive edge?
Coming from a South African base, we are relatively cost competitive from an engineering perspective compared to Europe. Secondly, we are completely technology agnostic. Many large manufacturers also tend to execute big projects, locking themselves into the use of a particular set of equipment. Although we have preferred suppliers, we will use the best fit for each project.
Over time, we have also built up a reputation for delivering quality installations on time that are also competitively priced. We have many entities within the CONCO group, and can therefore be very flexible in terms of participating in small- and large-scale projects.
Could you provide an example of a particular project that demonstrates CONCO’s capabilities?
One of the biggest projects we are currently working on is a US$105 million grid expansion project in Addis Ababa, Ethiopia. This project accounts for almost a third of our yearly revenue. We were able to put a finance package together with a South African bank, and managed to win that project at quite a late stage.
To date we have been building and delivering on schedule, and Ethiopian Electric Power (EEP) has been very happy with our work. This is a major upgrade on the electrical infrastructure around Addis, and will improve supply to the whole city. This, in turn, will spur economic growth as they currently suffer from blackouts and brownouts, like many other infrastructure-strained areas. Ethiopia currently has a tender out for a 100MW photovoltaic (PV) plant, which will be one of the biggest in Africa, and we are in the bidding to do the construction for that.
How will CONCO endeavor to meet growing renewables energy demand?
We have structured the company around good infrastructure and renewables, and we see renewables as a key area of growth. The South African experience is that the market is doubling every year in privately owned PV, and I believe that this trend is not far behind in the rest of Africa. We will continue to do our traditional business of building grid infrastructure, and that will always be an important part of our business, but we expect our footprint in renewables, both on-grid, off-grid and hybrid, to grow significantly in the next few years in the African market.