Denham to Steer Clear of Coal-Fired Power in Africa Expansion

LAGOS, Capital Markets in Africa: U.S. private-equity firm Denham Capital Management LP will shun coal-fired power as it looks to African energy projects for investment.

“We’re not targeting coal for any new investments,” Justin DeAngelis, Denham’s managing director and power-deals team leader, said Wednesday in New York. “Coal power is out of favor for people who want to own power plants.”

The stance of Boston-based Denham, with $8.4 billion under management, echoes that of other investors deterred by the difficulty of financing new coal projects as countries tighten climate-change regulation. The decision reduces its available opportunities in South Africa — the continent’s most industrialized economy — which still uses coal for more than 70 percent of generation.

“If my business is based on developing and building power plants, I have to think about who wants to own those at the end of the day,” DeAngelis said in an interview during the U.S.-Africa Business forum. “The European and American financiers for the most part won’t finance coal projects, so you’re left with utilizing Asian project-finance banks to do that.”

Denham, focused on energy and commodities, wants African power projects to make up more than a third of its total investments. Of its existing electricity investments on the continent, renewables make up 60 percent and natural gas accounts for the rest.

South Africa
While South Africa has the world’s fastest-growing renewables market according to Moody’s Corp., it also plans to procure an additional 2,500 megawatts of coal-fired power from independent producers in the next five years.

Earlier this week, Futuregrowth Asset Management, the country’s largest specialist fixed-income money manager with about 170 billion rand ($12.7 billion) in assets, said it had suspended funding to the coal industry until it develops environmentally sustainable methods of operating.

South Africa’s Department of Energy didn’t respond to an e-mail seeking comment.

Source: Bloomberg Business News