POWER PLAY

The Blackstone Group has joined a handful of firms investing in Uganda, a country surpassing many of its East African neighbours in terms of prosperity and stability – but badly in need of infrastructure improvements.

To date, most investments in the country have been small, around the $1 million mark, and made by either African firms, such as AfriCap MicroVentures, or emerging markets-dedicated buyout shops including Actis and Aureos Capital.

Last year, however, may have been a turning point for the small East African country, as bigger private equity investments began trickling in. Middle East & African Investment Company, a Dubai-based private equity firm, in March won the right to build and operate telecom services via local company HiTs Telecom Uganda, and will make an initial investment of $150 million.

But perhaps most noteworthy is Blackstone's backing of a landmark infrastructure deal that has been nearly a decade in the making. The private equity giant's portfolio company, Sithe Global Power, is the lead equity investor in the $872 million (€605 million) project whose financing, two years after the Government's award of the contract, is nearing completion.

The Bujagali project, expected to come online in 2011, entails building a dam on the Victoria Nile at Bujagali Falls, and creation of a 250-megawatt hydropower plant.

Sithe, headquartered in New York, has committed $110 million to the project, while the Ugandan Government will provide $20 million, and an additional $60 million will come from Industrial Promotion Services (IPS), the investment arm of the Aga Kahn, an Islamic spiritual leader. IPS is focussed on developing infrastructure in Africa and Asia.

Debt financing worth $682 million is being provided by institutions including the European Investment Bank, the African Development Bank and the World Bank. The World Bank's support consists of $130 million in loans from the International Finance Corporation, a partial risk guarantee of up to $115 million from the International Development Association for the project's commercial lenders, and an investment guarantee of up to $115 million from the Multilateral Investment Guarantee Agency.

Though an official stone-laying ceremony was conducted in late August, at which time all the associated lenders met and signed various agreements, the project's financing is just reaching its close, Sean Klimczak, a Blackstone associate involved in the deal, told sister publication PrivateEquityOnline.com. “The Government of Uganda, given the dire need for power, had advanced funds to begin construction of the project,” he said.

Blackstone holds a 78.8 percent stake in Sithe. When the private equity firm invested in the global power company in 2005, the Bujagali dam was already in the company's project pipeline. “We believed their portfolio of projects was attractive and this was a part of the broader portfolio,” Klimczak said.

In addition to the opportunity to partner with a unique set of institutions, Klimczak said the Bujagali project is appealing because it will enable Blackstone to obtain “private equity-like returns, while also meeting a significant need in Africa”.

The project will double the country's power supply, and provide electricity at roughly 6.5 cents per kilowatt hour as opposed to the rate currently paid by Ugandans for diesel-generated power, which is roughly 31 cents per kilowatt hour, Klimczak said.

And, he added: “We're replacing carbon-emitting diesel power generation with a green renewable energy source.”

The Bujagali dam project has a long, controversial history spanning roughly a decade. The first attempt to build the dam, led by Virginia-based power development company AES Corporation, was halted “due to a host of issues, a significant one being environmental resistance”, Klimczak said.

FIRST RESERVE CONSORTIUM FORMS MINING COMPANY
First Reserve Corporation, in partnership with AMCI Capital and Pamodzi Investment Holdings, has invested $420 million (€285 million) in the creation of Cooke, a uranium company based in South Africa. It will be formed from the uranium and gold assets of Harmony Gold Mining Company. The First Reserve consortium will own 60 percent of Cooke and Harmony will own 40 percent. The assets include three operational gold mines and a gold milling plant.

ECP TAKES NIGERIAN OIL & GAS STAKE
Emerging Capital Partners, the African buyout firm, has made its fifth investment in the continent's oil and gas sector, capturing a stake in Nigeria's biggest domestic oil and gas firm. It has invested $35 million (€24 million) in Nigerian holding company Ocean Oil & Investments, which in turn owns a 32 percent stake in Nigeria's largest oil and gas company, Oando. “As the largest indigenous company in the market, Oando is poised to capitalise on many opportunities in the market as the Nigerian Government seeks to increase the involvement of local companies in the country's oil and gas sector,” ECP chief executive Tom Gibian said in a statement.

CAPITAL TRUST TO RAISE $300M MENA FUND
Having almost fully committed its $65 million (€44 million) Levant and Northern Africa-based fund with seven investments to date, global investment firm Capital Trust is set to raise its fundraising sights for its third MENA fund. The buyout firm is aiming to raise $200 million to $300 million over the next few months from high-net-worth investors in the Middle East and institutional investors in Europe. The firm recently bought a 79 percent stake in an Egyptian software services company ITWorx for an undisclosed sum, alongside the Venture Capital Bank, which uses Islamic finance for venture investments, and Proparco, the private sector financing arm of the French Development Agency.

EGYPT ON THE RADARAfrica saw almost $8 billion of financial sponsor deals last year. While South Africa was unsurprisingly the continent's most powerful capital magnet, with five of the top ten deals (see below), Egypt also put itself firmly on the map with three of the top ten. These included Abraaj Capital's $1.4 billion purchase of Egyptian Fertilisers.

Deal Status Target Target Nationality Acquiror Deal Value $ (m)
Completed Edgars Consolidated Stores South Africa Bain Capital Partners LLC (IBO) 3,484
Ltd – EDCON
Completed Egyptian Fertilizers Co Egypt Abraaj Capital (IBO) 1,400
Pending Gold Reef Casino Resorts Ltd South Africa Ethos Private Equity Ltd (MBO); 1,045
Goldman Sachs & Co
Pending Misr Cement Qena (Bid No 2) Egypt ASEC Cement Co SAE 396
Completed Premier Food Industries Ltd South Africa Brait Private Equity (MBO) 214
Completed Manufacturing plant South Africa ABSA Capital (MBO) 195
(Furniture manufactury)
Completed Misr Glass Manufacturing Co Egypt MGM Holdings (65% – 35%); 178
Citadel Capital Inc
Completed Africa Holding (22%) Angola Helios Investment Partners LLP 171
Completed Equity Bank (Kenya) Ltd (25.1%) Kenya Helios Investment Partners LLP 166
Pending Tiger Automotive Ltd South Africa Ethos Private Equity Ltd (IBO) 162