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Uganda, Achwa Hydro 2

Stimulating economic growth with a 42MW run-of-river hydro plant

Context

Uganda has an electrification rate of just 18%, with 90% of Ugandans relying on charcoal and gathered wood for fuel.  The use of biomass for cooking and other household activities is labour intensive and is linked to deforestation and poor air quality. The Government of Uganda has made a strategic decision to explore the potential of renewables to meet the country’s fast-growing demand for power. Utilising Uganda’s considerable untapped hydro resource could supply much-needed clean, baseload power, forming a key part of Uganda’s future energy mix.   

Project

The Achwa Hydro 2 run-of-river plant in northern Uganda will deliver 42MW of hydro power to the country’s national grid.  Developed by Arpe Ltd, the plant will use innovative technology to filter large debris from the river water, preventing damage to the electricity generation turbines. The plant will connect to the national grid using a transmission line provided by Uganda Electricity Transmission Company Ltd (UETCL). UETCL and Arpe have entered into a 40-year Power Purchase Agreement (PPA), after which time ownership of the plant will revert to the Government of Uganda. Initially, the project struggled to secure necessary long-term finance. EAIF was approached, alongside DEG, BIO and OFID, to supply 75% of the project’s senior debt with a 15-year loan period, a repayment term not available from local or international commercial banks. EAIF’s $15m support enabled the project to close a funding gap, so enabling the developer to move to the construction phase.

Impact

Power delivered to the national grid by Achwa Hydro 2 will be sufficient to ensure new and improved access to electricity for 35,000 people. Access to more reliable power can transform living standards. Business opportunities will widen and more householders will have instant access to electricity to cook, refrigerate food, charge mobile devices and access more efficient public services.  The project is expected to improve household incomes as consumers of traditional biomass have been shown to spend up to 20% more of their monthly income on energy than those with access to modern electricity. The Achwa plant will employ 400 people during its construction and create a further 36 long-term positions.  The plant will deliver income tax revenues of more than $59m for the Government of Uganda.