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Italian utility to claw into Africa energy market

Paris - Italian utility Enel plans huge investments in renewable energy and grids in Africa, where it expects to find the kind of growth it has enjoyed in Latin America.

Enel's chief executive officer Francesco Starace told Reuters that in five years Enel expects to have built up to 5 000MW of renewable energy assets in Africa via its 69% owned Enel Green Power unit, which he headed until being appointed Enel CEO in May last year.

READ: Italian firm gets R2.1bn loan to build SA wind farm

He said parent company Enel - which has 96GW of net installed power capacity worldwide - will also invest strongly in African power grids, which will probably make it Africa's second-biggest power group after state utility Eskom.

"For us, Africa is the next Latin America," Starace told Reuters at the Business and Climate Summit in Paris.

"In five years Latin America will no longer be emerging but emerged," he said, adding that Enel is the largest player across that region in conventional energy, renewables and distribution.

Enel is investing in renewable energy assets in energy-starved South Africa with a balance of 60% wind and 40% solar.

It also plans to spend heavily on wind, solar, geothermal and hydro energy in Kenya, Tanzania, Uganda, Mozambique and Ethiopia, while participating in a wind tender in Morocco.

Enel will hope to improve on the chequered record of African power projects where governments and utilities have often struggled to maintain new turbines, transformers and power lines.

Those problems are illustrated by efforts to harness the Congo river's enormous energy at the Inga rapids with a dam large enough to power half of Africa. Years of conflict and misrule in the Democratic Republic of Congo meant the project has never been realised.

Starace noted that Africa needs growth in every kind of energy infrastructure.

Enel's Africa investments could include some fossil fuel-powered plants, but for now Starace expects most of Enel's investment will be in renewables and medium-sized hydro.

SA power cuts

Enel also plans an investment in African grids in coming weeks.

"In grids there is huge potential for Africa," he said.

He declined to give detail, but said microgrids, which connect renewable and other power sources in independent local networks, are the future of Africa.

He said that Europe's electrification in the early 20th century followed the same pattern, as plants powering factories added lines to supply nearby residential customers.

Eventually, all these small grids were connected to form Europe's power network.

"I don't see why Africa should be any different. Maybe only the Soviet Union did it the other way around," he said.

In South Africa, Enel now operates 10MW and is building 990MW, which will come online in the next two years.

Asked why South Africa is suffering so many blackouts, Starace said this was due to a combination of an accelerating economy, strong demographic growth and lack of spare capacity.

"Demand growth went out of control. With this peak demand, Eskom embarked on huge plans, but these invariably take longer and more money to complete," he said.

He said Eskom has launched several tenders for new capacity, open to international bidders and mostly for renewables.

Starace, aged 59, who replaced longtime Enel CEO Fulvio Conti, has said Enel would invest €18bn over the next five years, more than half in emerging markets such as Latin America and Africa, and double capacity at Enel Green Power.

In Paris, Starace said about 50% of Enel's global investments would go to renewables, about 30% to grids, and the rest in conventional generation assets.

"This investment will be 80% in emerging markets and 20% in mature markets," he said.

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