Annual Report 2015

PIDG FACILITIES

 

Emerging Africa Infrastructure Fund (EAIF)

Providing very long-term foreign currency loans to private sector investors to support projects in sub-Saharan Africa

Projects that reached Financial Close in 2015

Congo (Republic) Helios Towers

Chad Helios Towers

Ghana Eaton Towers

Uganda Siti 1 DI Frontier

Mozambique Moma Titanium Mineral Projects support facility

Nigeria African Foundries Limited II

Multiple countries O3B Expansion

Congo DR Plantation et Huileries du Congo (PHC)

Uganda Soroti Solar PV

 

Projects that became fully operational in 2015

Multiple Countries O3B

Côte d’Ivoire Azito Energie Expansion

Achievements in 2015

EAIF closed nine transactions during the year, leveraging $632m in private sector investments, significantly exceeding its targets. Deal sizes were on the whole smaller than anticipated, due to a focus on the renewable sector as well as the challenges of closing larger transactions as a result of the slowdown in the global infrastructure market. Falling commodity prices, coupled with new capital requirement regulations – which increased the cost of lending – saw commercial lenders (e.g. Barclays) withdrawing from SSA markets in 2015.

Notable EAIF transactions in renewables were the financing of two energy projects in Uganda; one of these, Access Soroti, saw EAIF provide $5.3m in long-term senior debt to enable the development of a 10MWp solar farm.

EAIF is mandated to work in very challenging frontier markets – fragile and conflict affected states and others with high credit risk – and in 2015 delivered PIDG’s first transaction in Congo-Brazzaville, part-financing Helios Towers Congo-Brazzaville (HTC) to acquire, build, own and lease a network of telecoms towers in the country. The project will increase vital access to telecoms and drive down costs to consumers.

 

Other notable highlights

At Lake Kivu, on the border between Rwanda and DRC, the KivuWatt project became operational. KivuWatt demonstrates the potential for an innovative approach to energy generation – utilising methane gas extracted from a lake-bed via moored barges. The methane powers a 25MW power plant, safely removing harmful gases from the lake-bed to supply the Rwandan national grid with electricity generated from a locally-found and competitively-priced fuel source. In addition to businesses and homes being able to benefit from a larger national supply of power, the amount of expensive, imported diesel fuel used to run business and domestic generators can be reduced.

In Rwanda’s capital Kigali, a water treatment and production project, Kigali Bulk Water, supported by DevCo at an earlier stage, will deliver fresh, clean water to around 500,000 households in the city. Although the transaction has not yet reached financial close, preparations are advanced. The project uses a form of PPA agreement derived from that used for energy generation projects; a pioneering example which demonstrates a method by which water projects can be financially viable.

 

2016 and beyond

Encouraging and supporting investment in digital infrastructure will be a key focus for EAIF going forward. Improved digital infrastructure has been identified as a key driver in enhanced development outcomes enabling, for example, the rapid expansion of mobile finance systems and increased connectivity for businesses. Access to digital infrastructure can also facilitate engagement with more remote communities, more quickly and cost-effectively.

Aligned with this, EAIF intends to prioritise increasing rural access to infrastructure – both in terms of telecoms and energy. Alongside larger on-grid projects, it believes that supporting independent grids for solar energy will be important, requiring innovative thinking around storage.

Uganda Access Uganda Solar (Access Soroti)

Delivering 10MWp of solar power to Uganda’s national grid, diversifying the country’s energy mix and reducing costs for business and domestic users

Context

Uganda has an electrification rate of just 18%. Accelerating industrialisation and continued economic and population growth in the region has led to a 7-9% per annum growth in demand for power. Uganda currently derives 82.1% of its installed capacity from hydropower plants, with thermal power dominating the remainder of the country’s energy mix. Although hydro power is clean and renewable, it is highly susceptible to fluctuating seasonal rainfall, putting the country at significant hydrological risk.

In response to this, the Government of Uganda (GoU) made a strategic decision to develop the country’s wider renewable energy sector. This included the creation, with international support, of a Global Energy Transfer Feed-in Tariffs (GETFiT) Premium Payment Mechanism designed to make small-scale (up to 20MW) renewable energy generation projects viable.

 

Project

Access Uganda Solar (Access Soroti) will develop, construct and operate a fixed tilt 10MWp solar photovoltaic (PV) plant in the Soroti District of eastern Uganda, around 300km north-east of the capital Kampala. The project will also construct a 3km, 33kV transmission line to feed power into the Ugandan national grid. The plant will sell power to the Uganda Electricity Transmission Company Ltd (UETCL) under a 20-year Power Purchase Agreement (PPA) backed by a sovereign guarantee from the GoU. The sponsors, Access Infra Africa Ltd and EREN Renewable Energy, were awarded the project following a tender process under the GETFiT programme, which will ensure that the net tariff payable by the GoU and Ugandan consumers is $0.11/KWh. The tariff is lower than existing market tariffs for hydropower, and significantly cheaper and cleaner than power from thermal sources.

Despite support from GETFiT, Access Soroti required a long debt tenor to be bankable. EAIF and the lead arranger, FMO, each provided 50% of the total senior debt for the project with a debt tenor of 17 years; significantly longer than that offered by local or international commercial banks. EAIF were involved in the original development of GETFiT and this, coupled with its substantial knowledge of the Ugandan energy sector, enabled it to process the project quickly. EAIF also brought its commitment to working in fragile DAC I countries and a willingness to accept the risks associated with small-scale renewables.

 

Impact

With construction set to commence in early 2016, the project will be the first industrial-scale solar project in Uganda and will assist in diversifying Uganda’s energy mix. By reducing dependence upon expensive, environmentally-damaging thermal power, the project will bring down the average cost per unit of electricity and reduce CO2 emissions by 263,355 tonnes per annum. Access Soroti marks the first major step in utilising the abundant solar irradiation of Uganda to address the country’s current electricity shortage and meet growing demand for sustainable, affordable power in the future.

‘Delivering electricity to Uganda is helping the country to create jobs and business activity.’

Stephane Bontemps, Managing Director at Access, and Hon. Peter Lokeris, Uganda’s State Minister for Mineral Development, celebrate the ground breaking ceremony for the Soroti solar power plant, the first of its kind in Uganda

Congo-Brazzaville Helios Towers will improve mobile telecoms access

As private sector appetite for direct investment in sub-Saharan telecommunications has increased, PIDG has scaled back its investment in this sector. However, where there is a need, in fragile and conflict affected states, there is still a role to play. The Helios Towers project marks PIDG’s first transaction in Congo-Brazzaville.

EAIF has provided essential debt finance – a $7m long-tenor loan – for the expansion of Helios Towers Congo-Brazzaville Limited (HTC). The project will enable the company – currently Congo-Brazzaville’s only independent tower company – to acquire, construct, operate and lease a network of telecoms towers to internet and mobile phone providers. The shared infrastructure model will drive down costs for consumers, create competition and enable greater coverage in remote and rural areas.

EAIF is in a unique position to share the expertise it has gained elsewhere in order to connect the citizens of Congo-Brazzaville to an affordable, reliable telecoms network.

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