Madagascar: African Development Bank approves guarantee of $100 million to hydro-power project, to benefit over 2 million people

AfDB NEWS & EVENTS

17-Dec-2019

The Board of Directors of the African Development Bank has approved a Partial Risk Guarantee (PRG) of $100 million to support the Sahofika hydro-power project in Madagascar, which will add 205 MW of renewable energy generation capacity to the national grid, benefitting over 2 million people.

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.

The Sahofika hydro power project, located on the Onive River, 100 km southeast of the capital Antananarivo, will involve the design, construction and operation of a 205 MW hydroelectric power plant, the construction of a 110 km transmission line to the site, and construction of camp facilities and 112 km of access roads.

Upon completion, the project will generate 1,570 GWh of renewable power annually. The project will enable Madagascar to displace up to 90% of thermal energy generation, to unlock its great hydro-power potential, and to expand its energy mix to more renewable sources. It will also contribute to the reduction of average end-user tariffs, and of greenhouse gas emissions amounting to 32,469 kt of CO2 over the 35-year concession period.

Noting the critical importance of the project to Madagascar, Wale Shonibare, the Bank’s Acting Vice-President for Power, Energy, Climate Change & Green Growth, said, “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. 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 Planwhich prioritizes boosting the power sector and increasing electricity access.