A landmark financing agreement has been completed for the 15MW Tina River hydropower project in the Solomon Islands, allowing construction to start in 2020.
The Government of Solomon Islands and the International Finance Corporation (IFC), a member of the World Bank Group, announced the completion of financing for the project. The over US$200 million package, through loans and grants from six institutions, marks the first large-scale infrastructure project for Solomon Islands to be developed as a public-private partnership (PPP).
The Tina River project will curb Solomon Islands’ reliance on imported diesel by almost 70%, lowering power prices for homes and businesses across the country, where the price of electricity is among the highest in the world and heavily exposed to global fuel price fluctuations and shocks. The project will also pave the way for the country to reduce its greenhouse gas emissions by two and half times its 2025 target.
“The Tina River Hydro is an historic project for Solomon Islands,” said Hon. Manasseh Sogavare, Prime Minister of Solomon Islands. “It will deliver cheaper power to Solomon Islanders and signals to investors that Solomon Islands is ready for large projects and partnerships. This first public private partnership infrastructure project in Solomon Islands opens the door for more, which will support much needed development, offering Solomon Islanders a better standard of living and more opportunities.”
Tina Hydropower Limited (THL), the Tina River Hydropower Development Project company, formed by Korea Water Resources Corporation (K-water) and Hyundai Engineering Company Ltd. (HEC) will build and operate the hydropower facility on the Tina River, 20km southeast of the capital, Honiara.
“The Tina River Hydropower Development Project is expected to create at least 440 jobs during the construction phase, which is also of benefit to the economy of Solomon Islands,” said Dr. Jaeil Ryoo, Tina Hydropower Limited, Chief Executive Officer. “Private companies have the capital and expertise to help make large projects like this a reality. We look forward to starting construction soon.”
The World Bank Group’s member organizations, which include the World Bank’s International Development Association (IDA), IFC and the Multilateral Investment Guarantee Agency (MIGA) have been supporting the Solomon Islands Government to develop the hydropower project for more than 10 years, including through identifying renewable energy sources, feasibility studies, and providing risk insurance. IFC acted as lead transaction advisor to the Government and helped put in place the PPP with project preparation, the investor selection process, negotiation of project agreements and the final financing agreement package.
“We are pleased to have supported the government of Solomon Islands by structuring a way to bring in the private sector to help the nation’s major shift from imported diesel to renewable energy,” said IFC’s Regional Director for East Asia and the Pacific, Vivek Pathak. “With the support of Australia, New Zealand and the multi-donor facility, DevCo, the agreement now in place shows how governments and the private sector can work together on key infrastructure projects to help nations wanting cleaner, cheaper and more reliable energy for their people.”
The financial package for the Tina River project includes funding from IDA, the Green Climate Fund (GCF) the Republic of Korea’s Economic Development Cooperation Fund (EDCF), the Abu Dhabi Fund for Development (ADFD), the Asian Development Bank (ADB), and the Australian Government. The total project cost is expected to reach US$240 million over the next 5 years.
“The World Bank has been supporting the Solomon Islands bring Tina River Hydro to life since 2008, when the Solomon Islands Government first sought our help to look at potential options for to deliver safe, reliable and affordable renewable electricity to Solomon Islanders,” said World Bank Country Director for Papua New Guinea and the Pacific Islands, Michel Kerf. “Since then, we have been proud to support Solomon Islands to bring this project to where it is today: with funding secured, environmental and social safeguards in place, financing arrangements locked in, and soon – the start of construction on what will be a landmark development project for the country.”
The project also marks the first in the country to introduce a unique landowner participation scheme with sharing of royalties through cooperatives benefiting more than 4,00 people from communities around Tina River, with benefits shared equitably among community members, including women and children.
IFC’s work advising the government of Solomon Islands on the project was undertaken under the Pacific Partnership- through which the governments of Australia and New Zealand and IFC are working to spur private sector investment in the Pacific. The project also received invaluable support from DevCo, a multi-donor facility affiliated with the Private Infrastructure Development Group (PIDG) with funding from the Netherlands and Sweden.
The project has also been supported by the Energy Sector Management Assistance Program and Global Infrastructure Facility.