How Africa's ETFs Could Generate Some Heat | ETF Trends

Geothermal energy is now being developed in Africa to the benefit of African economies and related exchange traded funds (ETFs). Until recently, Africa’s natural endowments of oil and minerals are not being consumed in Africa, but are shipped out to former colonial powers or other large emerging-market countries.

But now, Africa could have a type of energy that will benefit the local residents first. The technology for geothermal energy is said to be 100% indigenous, environmentally-friendly, and has been overlooked for too long, reports Sam Hopkins for Green Chip Stocks. One such example of geothermal energy is being utilized in the Great Rift Valley, Kenya, where it is currently generating 1,000 megawatts (MW) out of a 4,000 MW potential.

Benefits of geothermal are being shown by Ormat’s (ORA) Olkaria plant that has a 48 MW base load capacity which is saving 120,000 tons of imported oil and reduced average electricity costs across Kenya.

In 2009, geothermal production is expected to spread into Djibouti, Eritrea, Ethiopia, Uganda and Tanzania. The World Bank has already alloted $17 million to expand into those countries. Africa could wind up being the leader in using a form of energy that’s expected to be in use by twice as many countries by 2010. By 2030, the world’s geothermal energy production could quadruple.

But there is a caveat. Regions of Africa, such as Kenya and the eastern regions, are stricken with social and political unrest. There is also the problem of redirecting water to high-water intensity usage in geothermal wells.

ETFs that may benefit from investments into green technology such as geothermal energy in Africa include:

  • Market Vectors Africa (AFK): down 45.9% since July 22nd inception

ETF AKF performance

  • Claymore/BNY Mellon Frontier Markets (FRN): down 52.2% since its June 13th inception. Among the top African frontier markets held are Egypt, 17.4%, and Nigeria, 3.3%. Other countries seen in the fund in smaller amounts include: Morocco, Ghana, Kenya, Malawi and Zimbabwe. It is currently down 52.6% since its June 13th inception.

ETF FRN performance

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.