The Emerging Africa Infrastructure Fund (EAIF) has loaned US$27 million to Kikagati Power Company Limited (KPCL) to help build a 14MW run-of-the-river hydroelectric station at Kikagati on the Kagera River, on the border of Uganda and Tanzania.
KPCL’s plant will include an 8.5m-high dam, 300m in length, three turbines of 5.5MW each and associated earthworks, control and plant rooms and allied infrastructure connecting the plant to switchyards in Uganda and Tanzania. Around 250 people are involved in construction work. Once operational, around 10 permanent staff will run the plant.
100% of the energy generated will be bought by the Uganda Electricity Transmission Company Limited, Uganda’s single-buyer and transmission company, which will then sell half the energy on to Tanzania
The Kikagati plant is the 10th renewable energy development EAIF has backed in Uganda, demonstrating the benefits of replicating experience, financial structures and legal documentation. 138MW of renewable generating capacity in Uganda has been financed by the EAIF to date, representing a total investment of US$126 million.
Uganda has one of the world’s lowest rates of electrification, with an average national rate of 20%, falling to as low as 6% in rural areas. Kikagati’s rural location means that villages and businesses in the immediate area stand to benefit from the reliable and affordable power the plant will supply.
FMO, the Dutch development bank, was mandated lead arranger of the project financing, and is lending US$27 million. The EAIF and FMO loans are over 16 years, a term that improves the long-term viability prospects of the project.
The Kikagati plant will benefit from the “GETFiT” programme. GETFiT is funded by a number of European governments and the European Union. It provides a tariff subsidy to a number of renewable energy facilities across Uganda. GetFiT funding brings down the average cost of power to consumers.
“The Kikagati hydro power station will strengthen the economic development foundations of Uganda and Tanzania and provide good jobs in construction and operation,” said EAIF Executive Director, Emilio Cattaneo. “EAIF is now one of the most experienced providers of competitive long-term project finance to the African renewables energy industry. This is good for Africa, for employment and poverty reduction. Green energy is powering progress.”
KPCL is backed by the Africa Renewable Energy Fund, a US$205 million fund managed by Berkeley Energy.
Advisors to the lenders were: technical and E&S: Royal Haskoning; International counsel: Clifford Chance; Local counsel; Mukumbya Musoke Advocates; Insurance advisor: Indecs; Model auditor: BDO.
