Africa, Finance, New Development

Three accords finalized for 147-MW Ruzizi III hydropower project

Ruzizi III development

IPS, the industrial and infrastructure development arm of the Aga Khan Fund for Economic Development (AKFED), and Norwegian renewable energy company SN Power have signed project agreements for the 147-MW Ruzizi III hydropower project with the governments of Burundi, the Democratic Republic of Congo (DRC) and Rwanda.

The proposed Ruzizi III is a run-of-river hydropower project to be located on the Ruzizi River between Rwanda and DRC. Ruzizi River flows from Lake Kivu to Lake Tanganyika in central Africa and delineates the southern border of Rwanda with DRC and also forms the border between DRC and Burundi.

“Ruzizi III is truly a ground-breaking project; it is the first privately financed project in sub-Saharan Africa that will utilise a common regional resource to generate power that will be shared equally between three countries,” said IPS Chief Executive Officer Galeb Gulam. “Despite the complexities and challenges that this region has faced, this project sets a unique precedent for public-private partnership projects globally. Ruzizi III will contribute significantly to socio-economic development, building confidence in these economies, increasing access to reliable and affordable power to millions of people across the region.”

Currently, it is projected that the project will benefit a population of 30 million people, 70% of whom are living under the poverty line and averaging a 6% electricity access rate.

Once commissioned, Ruzizi III will double Burundi’s current capacity, increase Rwanda’s installed capacity by 33% and provide much-needed baseload power in Eastern DRC, a region that is otherwise isolated from DRC’s interconnected grid.

“This landmark project will generate clean and renewable power, reducing the region’s reliance on expensive thermal generation that currently costs in excess of $35 cents per kWh. It will also reduce the local communities’ dependence on wood fuel and charcoal; a major threat to the countries’ forests and biodiversity,” added Erik Knive, president and CEO of SN Power.

The project is structured as an independent power project based on a build, own, operate, transfer (BOOT) structure and underpinned by a 25-year concession agreement and power purchase agreements.

The respective national utilities will be responsible for developing the transmission lines that carry the power from the main substation at Kamanyola to the principal load centers.

With an estimated project cost of $650 million to $700 million, Ruzizi III will produce power that is expected to cost $0.11 to 0.13 per kWh.

“Considering the remote and challenging location of the power project, maintaining an affordable tariff is crucial. Financing of the project will, therefore, entail the largest blended financing in the region comprising of a unique combination of concessional funds, commercial debt, grants (contracting state equity) and privately financed equity; a first of its kind in Africa” explained Gulam.

Concessional funding is expected to be provided by, amongst others, African Development Bank, European Investment Bank, European Union, KfW, AFD and the World Bank.

For IPS, Ruzizi III will be part of the Africa Power Platform that was recently established by IPS, CDC and AKFED.

The project is expected to reach financial close in 2021 and is expected to be operational in 2025/2026.

This article was adapted from one previously published on the ESI-Africa website.