African Development Bank backs investment in regional hydropower project

Out-Law News | 06 Jan 2016 | 3:04 pm | 3 min. read

The African Development Bank (AfDB) has approved a $138 million package of loans and grants to support development of a hydroelectric power plant to serve Burundi, the Democratic Republic of the Congo (DRC) and Rwanda.

The AfDB said construction of the Ruzizi III plant, together with a transmission line, will encourage the further development of the countries’ energy sectors and “is expected to increase electricity trading between the Economic Community of the Great Lakes Countries (ECGLC)”.

Ruzizi III, a 147-megawatt (MW) generating plant, will cost a total of $625m to build and “will be the first regional project designed as a public-private partnership, aimed at optimising the hydropower potential of the Ruzizi cascade while taking advantage of private sector management efficiencies,” the AfDB said.

A “private partner, acting in the capacity of investor/developer”, will be recruited and awarded a concession to implement the project, the AfDB said. “This partner will be required to develop the project, be a majority partner in the project company with the three countries concerned and secure the necessary commercial debt.”

According to the AfDB, the project will help break the regional reliance on fossil fuels for electricity generation that has “led to serious electricity supply problems within the ECGLC countries, impeding economic activities already slowed due to decades of conflict”.

The Ruzizi III project involves building a run-of-river dam on the Ruzizi River between the DRC and Rwanda, downstream of Lake Kivu, and an 8.3 kilometre 220 kV transmission line from the plant to a despatch centre in Kamanyola, in the DRC’s South Kivu region.

After the project is completed, Burundi’s current total domestic electric generating capacity “is expected to double, while Rwanda’s is expected to increase by half”, the AfDB said. “DRC’s share is further expected to raise supply in the Eastern region currently not connected to the national grid network.”

The AfDB said: “The project will displace significant amount of fossil based power in the ECGLC region and increase the percentage of green energy. Additional benefits of the project include the creation of permanent and temporary jobs and a reduction in greenhouse gas emissions.”

The director of the AfDB’s energy, environment and climate change department Alex Rugamba said: “Sustainable regional infrastructure is a necessity element for strong regional integration and key to successfully tackling today’s most challenging climate change-related problems. The Ruzizi III hydropower plant project is central to AfDB’s strategic vision for the development of the African energy sector through the promotion of universal access to low-carbon and inclusive modern energy.”

Other organisations and institutions involved in the financing package, announced by the AfDB on 18 December, included the African Development Fund, the development agencies of France and Germany, the European Investment Bank, World Bank, and the EU.

According to the EU-Africa Infrastructure Trust Fund, institutional studies for the project led to proposals for an international treaty and creation of a ‘water management basin agency’ for the region that were approved by the energy ministers of the countries involved in July 2011. 

Figures from Burundi’s energy and mines ministry (52-page / 5.24 MB PDF) indicate that access to electricity for the Burundian population is “very low (10%) compared with other countries in the East African Community (EAC)”. However, the ministry said Burundi’s hydroelectric potential is 1,700 MW, of which only around 32 MW of capacity has been developed. “Specific opportunities for foreign direct investment are developing, bolstered by the country’s entry into the EAC,” the ministry said.

The Rwanda Development Board said current total installed domestic generating capacity is around 126 MW, with a 22.5% connectivity rate (21% on-grid and 1.5% off-grid). The board said Rwanda aims to boost generating capacity to 563 MW by 2017, supported by independent power producers and public-private partnerships.

A DRC energy policy paper (9-page / 400 KB PDF), published in 2012 with support from the Renewable Energy Access Program, said the country had “one of the lowest rates of electrification in all of Africa” with only 11% of the population having access to electricity. The paper said the DRC had “the largest hydroelectric capacity in Africa, with the potential to generate 100 gigawatts of power”, but only around 2% of this potential had been realised to date.

Earlier this year, a report by McKinsey & Company said the electricity sector in sub-Saharan Africa (SSA) alone would need capital investment of about $835 billion by 2040 to be able to meet the continent’s increasing demand for electricity.

The report said SSA’s power sector offers “a unique combination of transformative potential and attractive investment opportunity”. However, the report said governments in the region must provide “clear, consistent and transparent regulations” to attract private-sector financing to the power sector.