PIDG Company, The Emerging Africa Infrastructure Fund (EAIF) has Monday announced the signing of a US$27 million loan to Kikagati Power Company Limited (KPCL), which is building a 14MW run-of-the-river hydro electricity generating station at Kikagati on the Kagera River.
KPCL is backed by the Africa Renewable Energy Fund, a US$205 million fund managed by Berkeley Energy.
100% of the energy generated will be bought by the Uganda Electricity Transmission Company Limited, Uganda’s single-buyer and transmission company, which will then sell half the energy on to Tanzania.
The Kikagati plant is the 10th renewable energy development EAIF has backed in Uganda, which officials say demonstrates the benefits of replicating experience, financial structures and legal documentation.
138MW of renewable generating capacity in Uganda has been financed by the EAIF to date, representing a total investment of US$126 million.
Uganda has one of the world’s lowest rates of electrification, with an average national rate of 20%, falling to as low as 6% in rural areas.
Kikagati’s rural location means that villages and businesses in the immediate area are expected to stand to benefit from the reliable and affordable power the plant will supply.
KPCL’s plant is to consist of an 8.5m-high dam of 300m in length, three turbines of 5.5MW each and associated earthworks, control and plant rooms and allied infrastructure connecting the plant to switchyards in Uganda and Tanzania.
The Kagera River is the main tributary to Lake Victoria and the river basin area lies within Rwanda, Burundi, Tanzania and Uganda.
The site is on the border between Uganda and Tanzania and includes dams and a short headrace and tailrace founded on largely varying ground conditions.
Around 250 people are involved in construction work. Once operational, around 10 permanent staff will run the plant.
FMO, the Dutch development bank, was mandated lead arranger of the project financing, and is lending US$27 million. The EAIF and FMO loans are over 16 years, a term that improves the long-term viability prospects of the project.
The Kikagati plant will benefit from the “GETFiT” programme. GETFiT is funded by a number of European governments and the European Union.
It provides a tariff subsidy to a number of renewable energy facilities across Uganda. GetFiT funding brings down the average cost of power to consumers.
The Kagera River on which Kikagati is located forms the natural border between Uganda and Tanzania. The Project has been made possible through the close collaboration of the developer with the two governments.
EAIF Executive Director, Emilio Cattaneo said the Kikagati hydro power station will strengthen the economic development foundations of Uganda and Tanzania and provide good jobs in construction and operation.
“EAIF is now one of the most experienced providers of competitive long-term project finance to the African renewables energy industry. This is good for Africa, for employment and poverty reduction. Green energy is powering progress,” he said.