Two members of the World Bank Group, the International Finance Corp. (IFC) and Multilateral Investment Guarantee Agency (MIGA), have approved a plan to refinance more than US$400 million of loans to Bujagali Energy Ltd. (BEL). The members will also provide up to $423 million in guarantees in support of the Bujagali hydropower project.
The $900 million 250-MW Bujagali hydroelectric project is the largest private sector investment ever undertaken in the region, and the run-of-river project is located on Victoria Nile River near Jinja, Uganda. Commissioned in 2012, the facility accounts for about 45% of Uganda’s annual electricity generation, according to IFC.
The project is structured as a public-private partnership owned by U.S.-based Sithe Global, Industrial Promotion Services of Kenya and the government of Uganda. The partners formed BEL, which will own and operate the plant as per a 30-yeaer concession, after which the government will assume full ownership of the project for $1.
The refinancing package will extend the tenor of senior and subordinated loans originally provided in 2007 by IFC, the European Investment Bank, KfW, German Investment Corp., African Development Bank, Agencie Francaise de Developpement, Proparco, FMO, BNP Paribas, Nedbank, Standard Chartered Bank, and ABSA Capital. The commercial loans are supported by a partial risk guarantee issued by the International Development Association.
MIGA provided political risk insurance of up to 20 years for equity investors.
In a March 8 press release, IFC said this extension in tenor will reduce BEL’s annual debt-servicing payments and make it possible for the company to reduce the cost of electricity produced by the hydropower plant over the next five years. The government of Uganda has committed to fully-pass on these cost savings to consumers, in support of their goals to spur economic growth and expand access to energy.
According to IFC, Bujagali’s commissioning allowed Uganda to retire more than 100 MW of diesel power plants and made it possible to nearly eliminate government subsidies to the electricity sector. Since 2005, the share of Uganda’s population with access to electricity has increased from 9% to 22%, with the total number of customers over the same period having grown from 292,000 to more than 1.1 million.
IFC said more than 90% of Uganda’s electricity is now generated from renewable sources.