IFC and MIGA have announced they are supporting a refinancing package for the Bujagali hydropower project in Uganda in a bid to reduce electricity costs and improve access to power in the country.
The World Bank Group members said they are to refinance more than $400 million of loans to Bujagali Energy Limited and provide up to $423 million in guarantees in support of the project.
Bujagali, a run-of-river hydropower project on the Victoria Nile, is one of the largest power-generation plants in Uganda, contributing 45% of the country’s annual electricity generation. It provides clean, reliable base-load energy. Its commissioning in 2012 significantly reduced Uganda’s reliance on costlier thermal power generation.
The refinancing package will extend the tenor of senior and subordinated loans originally provided in 2007 by IFC, the African Development Bank (AfDB), the European Investment Bank (EIB), the Netherlands Development Finance Company (FMO), France’s Agence Francaise de Developpement (AFD) and Proparco, Germany’s DEG and KfW, and four commercial banks (ABSA, BNP Paribas, Nedbank and Standard Chartered Bank).
This extension in tenor will reduce Bujagali Energy Limited’s annual debt-servicing payments and make it possible for the company to reduce the cost of electricity produced by the hydropower plant over the next five years. The Government of Uganda has committed to fully pass on these cost savings to consumers, in support of their goals to spur economic growth and expand access to energy.
In addition, MIGA will provide political risk guarantees of up 20 years for equity investors in Bujagali Energy Limited, helping to shore up investor support and long-term engagement with the project.
An existing partial risk guarantee from the International Development Association (IDA) for two of the project’s commercial lenders remains in place.