The FDI angle

• AMEA Power invests $620m in a 300-MW wind farm in Ethiopia's Somali region.
• The project is part of the UAE’s $4.5bn clean energy initiative in Africa.

Why it matters: This investment reinforces the UAE’s role as a major foreign direct investment source in Africa, advancing renewable energy development and supporting electricity access.

Dubai-based renewable developer AMEA Power is ploughing ahead with its ambitious investment plans across Africa, signing an agreement with Ethiopia’s state-owned electricity company for the development and operation of a 300-megawatt onshore wind project.

The Aysha-1 project, located in the eastern Somali region of the country, is expected to cost $620m to construct and generate up to 1400 gigawatt-hours of clean energy annually once operational. 

The agreement signed on August 17 includes a power purchasing agreement (PPA) with EEP, an implementation agreement (IA) with the Ministry of Finance and a land lease agreement with the region’s state government. It reflects the growing ambitions of Emirati companies and the UAE government in Africa.

The Ethiopian wind project, which was officially launched during last year’s UN’s climate summit hosted in Dubai, is part of the UAE’s pledge to invest $4.5bn to help accelerate clean energy projects across Africa. 

Hussain Al Nowais, the chairman of privately-owned AMEA Power, tells fDi that the Ethiopian project will be “run commercially” and utilise cheaper concessional finance to offer a lower tariff cost of electricity. 

“We fulfil the direction of the [UAE] government and at the same time support the African need for power,” he adds. AMEA Power plans to fund 5GW of renewable power capacity in Africa by 2030 and is part of the UAE’s initiative alongside state-owned renewable developer Masdar, the Abu Dhabi Fund for Development and the Etihad Credit Insurance. 

AMEA POWER'S AYSHA-1 WIND PROJECT IN ETHIOPIA

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• Company: AMEA Power, UAE
• Location: Aysha, Somali Region, Ethiopia 
• Project investment: $620m
• Project generation capacity: 300MW
• Project expected commissioning: Q4 2027
• Total Africa target pipeline by 2030: 5GW
• Total Africa investment pledge by 2030: $5bn

Since 2022, UAE-based companies have made greenfield investment pledges in Africa worth almost $100bn, making the Gulf country the largest source of FDI, according to fDi Markets. This is ahead of large economies like the US and China, and former colonial powers like France and the UK.

AMEA Power alone has 1.6GW of renewables projects in operation and under development in Africa. This includes solar power plants in South Africa, Egypt, Mozambique, Uganda, Tunisia, Côte d’Ivoire, Togo and Morocco, as well as plans for a green hydrogen plant in the Kenyan port city of Mombasa.

Ethiopia’s reform agenda

Despite Ethiopia’s potential for wind, solar and geothermal projects, the East African country has less than 5GW of installed electricity generation capacity, more than 90% of which comes from hydropower dams exposed to fluctuating rainfall. About half of Ethiopia’s 123 million population currently has no access to electricity, according to the World Bank.

Bereket Alemayehu, an Addis Ababa-based economic law and policy advisor, says the PPA and IA signals Ethiopia’s policy “shift from an energy industry monopolised by the government for decades towards an industry involving the private sector in generating electricity.” 

Currently, electricity generation is permitted for private companies under Ethiopian law, with transmission and distribution still carried out by state-owned EEP and the Ethiopian Electric Utility (EEU) respectively, he adds. While these agreements pave the way for project construction to begin, Mr Al Nowais says they took “four years of work” to be reached. “The challenge we see in Africa is time. They need to build the capacity, resources and regulatory framework so they can accelerate execution of the project.”

Close observers of Ethiopia highlight that this delay reflects the government’s lack of experience in negotiating PPA contracts and conflict since 2020 between the central government and forces in the northern Tigray region. But it is also to ensure the maximum benefit from this type of foreign direct investment in Ethiopia.

“African countries must negotiate renewable energy projects in an all-inclusive manner to ensure that they include firm commitments on technology transfer,” says Kasirim Nwuke, managing partner at Mirisak & Associates, a policy research consultancy.

Chinese suppliers

The Aysha-1 project lies around 100km from the port of Djibouti, making it possible to truck-import components from shipping containers to the site within a few hours. While AMEA Power is “happy to source from anywhere”, Mr Al Nowais stresses the importance of Chinese suppliers of wind turbines and solar panels in keeping costs low enough to be able to offer affordable electricity tariffs from its projects in African countries. 

“Renewable energy development work is very competitive. As a developer we are torn between clients who want a low tariff and suppliers who are becoming expensive. Chinese suppliers have lower costs [than European and American suppliers] and have been very aggressive on pricing,” he says. 

But sourcing and transporting components for use in African renewables projects has become more expensive due to rising shipping costs caused by attacks by Yemen’s Houthi militants on vessels through the Red Sea. Since the start of 2024, the average weekly price to ship a 40-foot container has increased by 226% to $5428 worldwide, according to Drewry’s World Container Index.

“That’s a big challenge for us. As a developer we cannot afford it — it has to be reflected in the price,” admits Mr Al Nowais, who worries about the viability of some renewable energy projects in Africa as a result.

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