The African Development Bank (AfDB) has approved a Partial Risk Guarantee (PRG) of $100 million for development of the 205MW Sahofika hydropower project in Madagascar, a project which will help the country displace up to 90% of thermal energy generation.
The Bank’s support will include risk mitigation to the project developers and the debt providers by supporting the payment obligations of JIRAMA, the state-owned off-taker.
Located on the Onive River, the Sahofika project will involve the design, construction and operation of a hydroelectric power plant, a 110km transmission line to the site, construction of camp facilities and 112km of access roads.
“The Bank’s support to the national utility, JIRAMA, through the PRG provides much needed credit enhancement as JIRAMA continues to build its track-record as a bankable electricity off-taker that will in-turn mobilize investments into Madagascar’s energy sector,” said Wale Shonibare, the Bank’s Acting Vice-President for Power, Energy, Climate Change & Green Growth. “This will enable the country to achieve its strategic goals in terms of increased energy access, a more diversified energy mix and least cost generation”.
“The project, which supports Madagascar’s ongoing reforms in the energy sector, is expected to reduce the share of thermal power generation in the country’s energy mix and significantly reduce electricity tariffs. The displacement of thermal power generation will also enable JIRAMA to considerably reduce its fuel purchase and decrease subsidies from the government to sustain its operations,” said Aida Ngom, the Bank’s acting Director for Energy Financial Solutions, Policy and Regulation.
The Sahofika Project is aligned with the Bank’s High 5 Priority to “Light Up and Power Africa”, the Bank’s focus on energy access, and strengthening infrastructure for inclusive growth, as well as Madagascar’s Nationally Determined Contributions (NDCs) and the country’s Emergence Plan which prioritizes boosting the power sector and increasing electricity access.