AfDB affirms its support for Power Africa, with a commitment of more than US $600 million

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The African Development Bank (AfDB) is proud to be an anchor partner of Power Africa, a five-year United States of America Presidential initiative aimed at supporting economic growth and development by doubling access to power in Sub-Saharan Africa. In fact, the Bank’s work with the US Government on African development issues spans four decades. The AfDB’s contributions to Power Africa run broad and deep, including contributions to the initiative’s focus countries in the form of investments, support for policy reforms, advisory services and guarantees.

Last year alone, this support included the conversion of the Sustainable Energy Fund for Africa (SEFA) into a multi-donor trust fund; providing US $64.5 million for the Africa Renewable Energy Fund (AREF); issuing a loan of EUR 115 million for the 300 MW Turkana Wind Power Project in Kenya, along with a partial risk guarantee (PRG) of EUR 20 million; issuing a PRG Program of US $184 million along with a concessional loan of US $3 million to support Nigeria’s power sector privatization program; providing EUR 145 million for the Côte d’Ivoire–Liberia–Sierra Leone–Guinea Electricity Interconnection; and making US $58 million available for Tanzania’s Governance and Economic Competitiveness Programme.

AfDB’s work associated with the Power Africa focus countries in 2013

Between January and December 2013, the Bank approved several landmark operations associated with Power Africa countries for a total of approximately US $670 million. With SEFA – a bilateral trust fund established with funding from the Government of Denmark – the Bank led its coversion into a multi-donor trust fund with a wider remit. As part of the conversion, the United States Agency for International Development (USAID) will become the second anchor donor and make a contribution under the Power Africa Initiative. The conversion also opens the door for other donors interested in promoting private-sector led investments in small and medium-sized sustainable energy projects. Additionally, the Bank’s Board endorsed a new financing window to support related enabling environment activities.

In April 2013, the Côte d’Ivoire–Liberia–Sierra Leone–Guinea Electricity Interconnection received EUR 145 million of AfDB financing for the construction of about 1,400-kilometres of high-voltage transmission lines to connect the national networks of the four countries. The project is critical for reconstruction efforts currently underway in post-conflict Liberia and Sierra Leone and in the forest region of Guinea. Connecting these countries with Côte d’Ivoire would allow mutually beneficial power exchange and the reliable electricity supply necessary for economic growth and peace. The project will directly benefit 24 million people.

The Bank provided a loan of EUR 115 million for the 300 MW Turkana Wind Power Project in Kenya and a partial risk guarantee of EUR 20 million to mitigate the risk of a delay in constructing the 428-kilometre publicly owned transmission line and associated substations needed to connect the project to the national grid. The AfDB played a lead role in developing this independent power producer project, having worked with the project developer since 2009. The Bank was also the Mandated Lead Arranger for the transaction. The project is the largest wind power project in Africa and is expected to increase Kenya’s installed capacity by approximately 17% and contribute to the development of the project area.

The Africa Renewable Energy Fund (AREF) private equity fund benefitted from US $64.5 million from the Bank in November. The funding will be invested in small to medium-sized renewable energy projects in Sub-Saharan Africa (excluding South Africa). The Bank led the Fund’s development, including the structuring of the Fund and the selection of the Fund manager. AfDB and SEFA are co-sponsors and anchor investors providing US $25 million in equity each; SEFA will provide an additional US $10 million for AREF’s Project Support Facility to prepare and structure bankable projects. AREF will be headquartered in Nairobi and its priority countries include Kenya, Tanzania and Ghana. The Global Environment Facility (GEF) will invest US $4.5 million in equity in AREF from an AfDB-managed public-private partnership platform program.

Just before the end of the year, the AfDB also succeeded in establishing a Partial Risk Guarantee (PRG) Program of US $184 million along with a concessional loan of US $3 million for capacity building to support Nigeria’s power sector privatization program. The PRG mitigates the risk of the Nigeria Bulk Electricity Trading (NBET) – a state-owned entity that purchases electricity from independent power producers (IPPs) – of not fulfilling its contractual obligations under its power purchase agreements with eligible IPPs. Hence, the PRGs could potentially support the provision of 1,380 MW of power by 2016. Additional guarantees are envisaged for 2014.

Also in December, the Bank approved US $58 million to Tanzania’s Governance and Economic Competitiveness Programme. The program will target private sector development through energy sector reforms and help lay the foundation for an energy sector-focused budget support operation planned for 2014. The African Legal Support Facility (ALSF) hosted by the AfDB is currently also assisting the Government of Tanzania in developing a PPP toolkit and regulations for energy projects. The ALSF is also finalizing support to the Government of Ethiopia regarding the negotiations of the Corbetti Geothermal Project.

Looking ahead: Deepening engagement with Power Africa focus countries

To further its impact, the Bank is planning to deepen its engagement in Power Africa in 2014. In the near future, it will finalize an Energy Development and Access Project that aims to improve the Ghanaian population’s access to reliable and quality electricity services. It will do so by a) supporting the reinforcement of Ghana’s Electricity Company, b) extending the distribution system in peri-urban or rural areas, and c) deploying off-grid solar photovoltaic systems. Later in 2014, the Bank expects to work on a variety of projects ranging from energy access in Liberia to geothermal development in Kenya.

In addition, under the aegis of the Climate Investment Funds, the Bank has led work on the Scaling-up Renewable Energy Program (SREP) Investment Plan for Tanzania and prepared jointly with the World Bank the Scaling-up Renewable Energy Program (SREP) Investment Plan for Liberia. This will lead to projects in both countries.

Lastly, at a Sustainable Energy for All (SE4ALL) Stakeholders Meeting in Tunis convened by the SE4ALL Africa Hub, some of the Power Africa countries (Ghana, Kenya, Tanzania and Liberia) were prioritized for the development of SE4ALL Action Agendas and Investment Prospectuses in 2014.

While the financing gap in the energy sector appears daunting in the focus countries, the Power Africa initiative offers a promising way forward to contribute to their transformation and have substantial impact on the population. The AfDB – working together with its development partners –is committed to promoting the energy access agenda, including through private sector development, using all instruments at its disposal.