African Energy Mega Projects: financing options and study timeframes (1.2)

Blended finance vehicles bring together investors with different risk tolerances and return expectations, helping bring private investors to capital-starved but often volatile sectors and markets in developing countries. Public and philanthropic funders can reduce risks for private investors with first-loss protections or loan-guarantees, or increase their returns, by providing low-interest loans. Any first losses in the Africa Agriculture and Trade Investment Fund, for example, are covered by development banks, reassuring private investors.

One type of financing innovation that offers early promise in some emerging markets is that of Yieldscos, publicly traded companies that finance new clean energy projects by offering investors the promise of steady dividends based on project cash flows. Among those taking advantage is Sun Edison’s Yieldco, TerraForm Global, which operates clean energy plants in South Africa, India and several other countries generating nearly 1,000 MW. And now already half built Africa’s biggest hydroelectric project – the $4.8bn Grand Ethiopian Renaissance Dam.

Since construction of the nearly two-kilometre-wide, 170 m high dam began in 2011, governments in Egypt have cast GERD as an existential threat, claiming it will reduce the flow of the Nile, on which Egypt depends.

It's claimed the Great Inga Dam in the DRC would produce 40,000 MW of energy, that's twice as much as China's Three Gorges Dam, currently the world's largest. Source: CNN.com
It’s claimed the Great Inga Dam in the DRC would produce 40,000 MW of energy, that’s twice as much as China’s Three Gorges Dam, currently the world’s largest. Source: CNN.com

But the new technical studies will start in February 2016, and will take between six and 15 months for them to be completed.

 “We are still facing a great dilemma, since Ethiopia is insisting on continuing construction of the dam without taking any political pledge to comply with the studies’ recommendations, which may be difficult to implement after the dam is complete and operating,” says an Egyptian official familiar with the negotiations.

 

Scheduled to be completed by July 2017, this dam will cost the Ethiopian government $4.7 billion. The Renaissance Dam sits on the Blue Nile river in the Benishangul-Gumuz region. Creating 12,000 jobs and generating 6,000 MW of energy, the dam will also serve neighboring Sudan and Egypt. Source: CNN.com
Scheduled to be completed by July 2017, this dam will cost the Ethiopian government $4.7 billion. The Renaissance Dam sits on the Blue Nile river in the Benishangul-Gumuz region. Creating 12,000 jobs and generating 6,000 MW of energy, the dam will also serve neighboring Sudan and Egypt. Source: CNN.com

Another major sticking point in negotiations is how quickly Ethiopia will try and fill the reservoir, which will have a capacity of more than 70 billion cubic metres.

Some experts have said it could take seven years, but Egypt wants the period lengthened to 11 years to reduce downstream impacts.

Having raised the project funding mostly by itself, the Ethiopian government will be looking to start generating electricity – and a return on its investment – as quickly as possible.

 

Also in East Africa , Kenya has successfully piloted infrastructure bonds to raise funds for much-needed infrastructure development. Good example of such: Konza Technology City. The PPP financing model sees the government putting up only 5% of the total cost. Kenya will lease land to private investors to set up shop.

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