IFC, a member of the World Bank Group, announced a commitment of $27 million in senior debt to support the Western Area Power Generation Project in Sierra Leone—the first of its kind in the country. The successful implementation of the project will rely on sustained commitment to broader reforms aimed at revitalizing the power sector. These reforms are being supported across the World Bank Group.
IFC also acted as the lead arranger and interest rate swap provider to mobilize a further $109 million in long-term financing from other development finance institutions, including the African Development Bank, CDC Group plc (the United Kingdom’s development finance institution), Emerging Africa Infrastructure Fund, and FMO (the Dutch development bank). The debt financing package will support an independent power generation facility in an industrial zone about four kilometers outside of Freetown, the capital of Sierra Leone. The project covers the development, construction, and operation of a 57 megawatt heavy oil fuel-fired power plant.
Karim Nasser of TCQ Power said, “Five years ago we set out on the incredibly challenging task of developing the first IPP in this post-conflict African nation. With the support of IFC and other lenders we move ever closer to realizing that objective and paving the way for further independent power generation in Sierra Leone. IFC has been a leader in structuring a commercially viable project and helping us mobilize support from other lenders.”
Power sector reform is being supported across the World Bank Group through products to reduce exposure to real investment risks (including operational and off-taker risks) that can make private investment financially viable. The World Bank Group’s IDA (International Development Association) is working toward providing a partial risk guarantee in addition to a package to rehabilitate and upgrade the national distribution network. MIGA (the Multilateral Investment Guarantee Agency) aims to provide a political risk guarantee to cover equity, shareholder loans, and retained earnings.
Vera Songwe, IFC Director for West and Central Africa, said, “Private sector investors require tailored solutions to make large, long-term power sector investments in Sierra Leone, where less than 15 percent of the population has access to electricity. IFC’s ability to leverage products and advice across the World Bank Group reduces risk and helps mobilize investment in countries where we are most needed and the policy environment is robust.”
The country’s power sector suffers from decades of underinvestment in power generation, transmission, and distribution. Transmission losses are at 38 percent, among the highest in Africa. Grid connection rates are low, and there is regular load shedding and a non-cost recovery tariff scheme. The national power utility company—Electricity Distribution and Supply Authority, or EDSA—has faced challenges that trapped the country’s power sector in a vicious cycle keeping residents in the dark and hindering economic growth.
Once the project has received various approvals, it is expected the power project will be sponsored by CDC and Abu Dhabi energy company, TCQ Power Limited. Globeleq, a leading independent power producer in Africa, is expected to manage CDC’s direct investment in the asset and will provide development, construction and asset management expertise. Electricity generated by the facility will be sold to the national off-taker EDSA under a 20-year power purchase agreement.