Mali to receive $25 million loan for solar plant set to transform West Africa energy market
The African Development Bank (AfDB) Board of Directors has approved a senior concessional loan of $25 million to fund the Segou Solar PV Project, Mali’s first utility-scale solar photovoltaic (PV) power plant.
The project, one of the first in Sub-Saharan Africa, consists of the design, construction and operations of a 33 MW Power Plant. The transformational project will lead to a direct increase in the country’s installed capacity from a renewable resource and will generate 52.7 GWh annually (approximately 10% of the current generation capacity) over 25 years for a lifetime output of 1,316.75 GWh.
The project will be funded by the Program for Scaling Up Renewable Energy in Low Income Countries (SREP) of the Climate Investment Funds (CIF), with co-financing from the AfDB (US $8.4 million) and International Finance Corporation, $8.4 million.
This loan will help Mali firmly set its energy path on a climate-smart footing while ensuring more sustainable basic energy services to its citizens. The project will also create a replicable business model for private investment in solar PV markets across West Africa.
The project will be implemented by a Special Purpose Vehicle that will be fully owned by the private sector under a 25-year Build, Own, Operate & Transfer Concession Agreement with the Government of Mali and a 25-year Power Purchase Agreement with Mali’s national utility, Énergie du Mali.
“Introducing utility-scale solar PV as an energy source will enable Mali to harness its abundant solar energy potential, diversify the country’s energy mix, and increase access to cleaner energy for its citizens,” said Anthony Nyong, AfDB’s Director of Climate Change and Green Growth.
“The project’s specific business model is a potential energy game-changer for Mali and indeed for all of West Africa. The project is a demonstration of the significant role that concessional climate finance can play in mitigating project specific risks and in addressing barriers that would otherwise hinder private sector involvement in renewable energy projects. This structure not only allows the Government of Mali to allocate valuable resources to other sectors of the economy, it also smoothens the way for private sector investments. It has ultimately opened the door for the industry to begin to flourish in West Africa.”
While solar PV is a technology that can be deployed in a flexible, scalable and rapid manner, first-movers face significant market barriers. Such barriers include high transaction costs, limited ability to raise financing, lack of capacity and challenges linked to the learning curve, permitting and regulatory compliance, weak transmission network and/or unreliable grid, and off-taker and country risk. Project preparation support, concessional support, and technical expertise are examples of the instruments still needed to help demonstrate the bankability of solar PV projects.
“SREP is uniquely designed to help low-income countries like Mali find ways to break down barriers to private sector engagement in renewables,” said Leandro Azevedo, Co-task Manager and Senior Climate Finance Officer at the AfDB. “SREP is helping low-income countries like Mali establish bankable solar PV projects under sound regulatory frameworks and lower power generation costs, and it will ultimately contribute to reducing reliance on expensive fossil fuel imports and subsidies in power generation.”
Established in 2008 as one of the largest fast-tracked climate financing instruments in the world, the US $8.3-billion CIF provides developing countries with grants, concessional loans, risk mitigation instruments, and equity that leverage significant financing from the private sector, MDBs and other sources.
Five MDBs – the African Development Bank (AfDB), Asian Development Bank (ADB), European Bank for Reconstruction and Development (EBRD), Inter-American Development Bank (IDB), and World Bank Group (WBG) – implement CIF-funded projects and programs.