Uganda
Kikagati Cross border hydropower generation, Uganda
EAIF provided secured long term USD debt to Kikagati HPP - the first cross border hydropower project between Uganda and Tanzania on the Kagera river
$87.7m
Total project investment
Expected to generate enough power to meet the average consumption of approximately
815,590
Background
Uganda and Tanzania have low electrification rates of 42.6% and 35.6% respectively, with rural access rates falling to 38% and 18.8%. Uganda and Tanzania are both growing economies that have suffered from underinvestment in their power sectors.
Tanzania’s power sector has limited participation from IPPs. The parastatal offtake and system operator TANESCO faces several challenges affecting its operational and financial performance, and lacks a credible payment track record vis à vis IPPs.
Kikagati is a low-head, run-of-river cross-border project – its construction is complex and there are logistical and legal challenges around moving equipment and labour across the border.
Project
EAIF and FMO are providing 16 year term loans to finance the development of the project. Such long term loans continue to be unavailable in the regular banking channels in East Africa.
100% of the energy generated at Kikagati will be bought be the Uganda Electricity Transmission Company, Uganda’s national power utility. It will then sell 50% of Kikagati’s power to Tanzania. The commercial and legal arrangements underpinning the sale of electricity is governed by Bilateral agreements. This structure limits project offtake risk exposure to UETCL, thereby ensuring and enhancing bankability.
When operational, Kikagati plant will be benefit from the GET FiT programme, which is funded by the EU and a number of European governments it brings down the average cost of power to consumers.
Impact
The project is expected to generate over 110GWh of clean energy annually, which is enough power to meet the average consumption of approximately 815,590 people in Uganda and Tanzania.
The project will provide employment for c.250 people during construction. Most hires are local workers who will benefit from training and development programmes.
As the first cross border power IPP, this project and financing is expected to have significant demonstration effects by promoting further integration of the East African Power Pool.
The project is located in a remote and underserved area along the border and will benefit the local population in both countries.