The African Development Fund has approved a €4.02 million (US$4.4 million) loan with a grant component to finance the Government of Madagascar’s €30 million equity investment in the 205-MW Sahofika hydropower project.
The Sahofika project is on the Onive River, 100 km southeast of the capital Antananarivo. A hydroelectric power plant will be constructed on a build-own-operate-transfer basis, 110 km of access roads will be built and rehabilitated, and a 75-km-long 220 kV transmission line will be constructed.
The project will generate affordable, clean energy benefitting some 8 million people and is expected to contribute to the avoidance of 900,000 tons of CO2 equivalent annually.
According to a press release, the government has committed to plough back the returns from the project to reduce electricity tariffs for the people of Madagascar.
Additional funding for the project is expected to come from the European Union and the Arab Bank for Economic Development in Africa
“The support to the Sahofika project exemplifies the Bank’s commitment to delivering quality, affordable energy access across the continent for sustainable and inclusive growth, while helping member countries to responsibly harness their vast, yet underdeveloped renewable energy resources,” said Dr. Kevin Kariuki, the bank’s vice president for Power, Energy, Climate Change & Green Growth. “As the largest hydro power project under development in the country, the Sahofika project will unlock Madagascar’s hydropower potential, and diversify its energy mix in favour of renewable at 90%.”
In December 2019, acting as Mandated Lead Arranger, the bank approved a Partial Risk Guarantee of $100 million toward the Sahofika project to mitigate liquidity risk. The bank is also supporting the Power Transmission Network Reinforcement and Interconnection Project, aimed at reinforcing and expanding Madagascar’s transmission network in order to evacuate the additional power generated by this large hydro project.
The Sahofika project is aligned with the bank’s New Deal on Energy for Africa and the bank’s Climate Change Action Plan, whose collective goals include expanding green energy infrastructure for sustainable and inclusive growth. It is also in line with the government of Madagascar’s energy policy.
The African Development Fund (ADF) is the concessional financing window of the Bank Group that provides low-income Regional Member Countries with concessional loans and grants in support of projects that spur poverty reduction.