Blackstone-backed group strikes African oil pipeline deal

Black Rhino, the African infrastructure investor owned by US private equity group Blackstone, has made its first $300m investment in a strategically important fuel pipeline between Ethiopia and Djibouti.

The deal, which is one of the most high-profile US investments in the region, is the first phase of the planned $1.6bn Horn of Africa pipeline, agreed by the governments of Ethiopia and Djibouti last year. The investment was announced on the eve of the annual US-Africa business forum in New York.

The 340-mile long project will transport diesel, petrol and other products from facilities in the Arabian Sea port of Djibouti City to central Ethiopia, one of east Africa’s fastest-growing economies, which currently relies on trucks for its fuel supplies.

“In Djibouti and Ethiopia, the growth of fuel demand has rocketed, as across east Africa,” said Brian Herlihy, Black Rhino’s founder and chief executive. “It is a major energy security issue.”

The project is likely to be closely watched given the changing geopolitical balance in the region. Djibouti has become a military hub for several governments in recent years, including hosting China’s first ever overseas naval base.

The pipeline will also pass through Ethiopia’s Oromia region, where protests have recently erupted against the government.

Ethiopia and Djibouti are seen to have picked a US partner for the pipeline in part to lessen their reliance on China for key infrastructure. Chinese state-owned companies are building a railway between the two countries that is due to open next year.

“You’re also starting to see countries reaching certain debt levels reminding them that they can’t take these projects on all by themselves,” Mr Herlihy said.

“The reality is that this is the lowest-cost solution out there,” he said, adding that the pipeline concession had a “very transparent, long-term structure”.

Funding for the project will be drawn from equity from Blackstone funds and debt raised from institutional investors.

The pipeline will also be one of the few projects supplying fuel to Africa’s interior not to be constructed with the involvement of a commodity trading house.

Black Rhino is also announcing a $300m investment in a Senegalese fuel power project at the US-Africa forum.

Organised by the US department of commerce and Bloomberg Philanthropies, founded by former New York mayor Michael Bloomberg, the forum is intended to bring together African governments with US companies.

The forum will be one of the legacies of the administration of President Barack Obama as he prepares to leave office, as well as the Power Africa initiative to develop generation capacity on the continent.

Caterpillar, the US construction equipment manufacturer, will also announce at the forum a $1bn investment in staff training and rebuild facilities in African markets over the next five years.

Penny Pritzker, the US commerce secretary, denied that US government efforts to increase American corporate involvement in the region were in competition with Chinese government investments.

“Ours is an American approach, and we’ll leave other countries’ models to other countries,” she added.

By Joseph Cotterill

Published on Sep 28,2016 [ Vol 17 ,No 856]



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