Alex Rugamba, Director of the Energy, Environment and Climate Change Department at the AfDB

Here at the African Development Bank (AfDB), we’re proud to be an anchor partner of  Power Africa, the US Government’s presidential initiative aimed at supporting economic growth and development by doubling access to power in sub-Saharan Africa.

In fact our work with the US government on African development issues spans four decades. The Bank’s contributions to Power Africa run broad and deep, including contributions to the initiative’s focus countries in the form of investments, support for policy reforms, advisory services and guarantees.

As part of the Power Africa Initiative, AfDB energy projects will support hundreds of thousands of businesses to increase  earnings in  focus countries.  Last year alone, this support included the conversion of the Sustainable Energy Fund for Africa (SEFA) into a multi-donor trust fund; providing $65 million for the Africa Renewable Energy Fund (AREF); issuing a loan of €115 million for the 300 MW Turkana Wind Power Project in Kenya along with a partial risk guarantee (PRG) of €20 million; issuing a PRG Program of $184 million along with a concessional loan of $3 million to support Nigeria’s power sector privatization program; providing €145 million for the Cote d'Ivoire – Liberia - Sierra Leone - Guinea Electricity Interconnection; and making $58 million available for Tanzania’s Governance and Economic Competitiveness Program.

Power Africa in 2013

Last year, the Bank approved several landmark operations associated with Power Africa countries for a total of approximately $670 million. With SEFA – a bilateral trust fund established with funding from the Government of Denmark – the Bank led its conversion into a multi-donor trust fund with a wider remit. USAID will become the second anchor donor and make a contribution under the Power Africa Initiative. The conversion also opens the door for other donors interested in promoting private-sector led investments in small and medium-sized sustainable energy projects. Additionally, the Bank’s Board endorsed a new financing window to support related enabling environment activities.

Last April, the Cote d'Ivoire – Liberia - Sierra Leone - Guinea Electricity Interconnection received €145 million of AfDB financing for the construction of about 1,400-kilometres of high voltage transmission lines to connect the national networks of the four countries. The project is critical for reconstruction efforts currently underway in post-conflict Liberia and Sierra Leone and in the forest region of Guinea. Connecting these countries with Cote d’Ivoire would allow mutually beneficial power exchange and the reliable electricity supply necessary for economic growth and peace. The project will directly benefit 24 million people.

We also provided a loan of €115 million for the 300 MW Turkana Wind Power Project in Kenya and a partial risk guarantee of €20 million to mitigate the risk of a delay in constructing the 428-kilometre publicly owned transmission line and associated substations needed to connect the project to the national grid. The AfDB played a lead role in developing this independent power producer project, having worked with the project developer since 2009. The project is the largest wind power project in Africa and is expected to increase Kenya’s installed capacity by approximately 17% and contribute to the development of the project area.

The Africa Renewable Energy Fund (AREF) private equity fund received an approval of $65 million from the Bank in November. The funding will be invested in small- to medium-sized renewable energy projects in Sub-Saharan Africa (excluding South Africa). The Bank led the fund’s development, including the structuring of the fund and the selection of the fund manager. AfDB and SEFA are co-sponsors and anchor investors providing around $25 million in equity each; SEFA will provide an additional $10 million for AREF’s Project Support Facility to prepare and structure bankable projects. AREF will be headquartered in Nairobi with priority countries across Africa, including, Kenya, Tanzania, and Ghana. The Global Environment Facility (GEF) will invest $4.5 million in equity in AREF from an AfDB-managed public-private partnership platform program.

The AfDB also established a Partial Risk Guarantee (PRG) Program of $184 million along with a concessional loan of $3 million for capacity building to support Nigeria’s power sector privatization program. The PRGs mitigates the risk of the Nigeria Bulk Electricity Trading (NBET) – a state-owned entity that purchases electricity from independent power producers (IPPs) – of not fulfilling its contractual obligations under its power purchase agreements with eligible IPPs. Hence, the PRGs could potentially support the provision of 1,380 MW of power by 2016. Additional guarantees are envisaged for 2014.

Also in December, the Bank approved $58 million to Tanzania’s Governance and Economic Competitiveness Programme. The program targets private sector development through energy sector reforms and help lay the foundation for an energy sector focused budget support operation planned for 2014. The African Legal Support Facility (ALSF), hosted by the AfDB, is assisting the Government of Tanzania in developing a PPP toolkit and regulations for energy projects while also finalizing support to the Government of Ethiopia on negotiations of Corbetti Geothermal Project.

Looking ahead: deepening engagement with Power Africa focus countries

The Bank plans to deepen its engagement with Power Africa in 2014. In February 2014 we approved an Energy Development and Access Project that aims to improve the Ghanaian population's access to reliable and quality electricity services by: a) supporting the reinforcement of Ghana’s Electricity Company; b) extending the distribution system in peri-urban or rural areas; and c) deploying off-grid solar photovoltaic systems. Later in 2014, the Bank expects to work on a variety of projects ranging from energy access in Liberia to geothermal development in Kenya.

In addition, under the aegis of the Climate Investment Funds, the Bank has led work on the Scaling-up Renewable Energy Program (SREP) Investment Plan for Tanzania and prepared jointly with the World Bank the Scaling-up Renewable Energy Program (SREP) Investment Plan for Liberia. This will lead to projects in both countries.

Finally, at a Sustainable Energy for All (SE4ALL) Stakeholders Meeting in Tunis convened by the SE4ALL Africa Hub, some of the Power Africa countries (Ghana, Kenya, Tanzania, and Liberia) were prioritized for the development of SE4ALL Action Agendas and Investment Prospectuses in 2014.

While the financing gap in the energy sector appears daunting in the focus countries, the Power Africa Initiative offers a promising way forward to contribute to their transformation and have substantial impact on the population. The AfDB - working together with its development partners - is committed to promoting the energy access agenda, including through private sector development, using all instruments at its disposal.

The AfDB is a multilateral development bank whose stakeholders include the 54 African countries and 27 non-African countries. Its primary objective is to contribute to the sustainable economic development and social progress of its regional members.