IFC and MIGA Boards invests $400 in refinancing Bujagali Energy to reduce Ugandan electricity costs
The Board of Directors of IFC and MIGA have approved a plan to refinance more than $400 million of loans to Bujagali Energy Limited and provide up to $423 million in guarantees in support of the Bujagali hydropower project, with the aim to help reduce electricity costs in Uganda, where only one in five people have access to electricity.
Bujagali, a run-of-river hydropower project on the Victoria Nile, is one of the largest power-generation plants in Uganda, contributing 45 percent of the country’s annual electricity generation. It provides clean, reliable base-load energy. Its commissioning in 2012 significantly reduced Uganda’s reliance on costlier thermal power generation.
The refinancing package will extend the tenor of senior and subordinated loans originally provided in 2007 by IFC, the African Development Bank (AfDB), the European Investment Bank (EIB), the Netherlands Development Finance Company (FMO), France’s Agence Francaise de Developpement (AFD) and Proparco, Germany’s DEG and KfW, and four commercial banks (ABSA, BNP Paribas, Nedbank and Standard Chartered Bank).
This extension in tenor will reduce Bujagali Energy Limited’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.
In addition, MIGA will provide political risk guarantees of up 20 years for equity investors in Bujagali Energy Limited, helping to shore up investor support and long-term engagement with the project.
An existing partial risk guarantee from the International Development Association (IDA) for two of the project’s commercial lenders remains in place.
The World Bank Group has been a long-term partner in the Ugandan power sector. The World Bank, through IDA, continues to engage with the government to support efforts to upgrade the country’s transmission and distribution networks and expand on-grid and off-grid access to electricity, providing connections for homes, schools, and health clinics. IFC is already an investor in Umeme—Uganda’s main distribution company—both as lender and shareholder.
Bujagali’s commissioning in 2012 allowed the government to retire more than 100 megawatts 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 percent to 22 percent, with the total number of customers having grown from 292,000 to more than 1.1 million over the same period.
More than 90 percent of Uganda’s electricity is now generated from renewable sources, making the Ugandan power grid one of the cleanest in the world.