World Bank approves US$340M for Great Lakes hydropower project

The World Bank last week approved US$340 million in financing for the US$468.6 million 80-megawatt Rusumo Falls Hydroelectric Project in Rwanda, Africa underlining the point that Guyana could have sought to win backing for the Amaila Project from this institution.

The cost per megawatt of this project at US$5.8 million is above the US$5.2 million pegged for the Amaila Falls Hydropower Project (AFHP).

The future of Amaila is unclear following Sunday’s formal announcement by Sithe Global, the developer for AFHP, that it was withdrawing over the project’s failure to win political consensus. This came after the main opposition APNU voted against parliamentary measures aimed at enabling the venture. APNU, among other things, had cited the costs associated with the AFHP. President Donald Ramotar has since pledged that he would try to persuade the investors to stay on even as APNU has stood its ground on its objections to the project in its current form.

In 2012, executives of Sithe had expressed surprise that the World Bank had not been involved in supporting Amaila with finance. In 2010, the then Country Representative to Guyana, Giorgio Valentini said that the Bank was never approached by Guyana for support for the AFHP. In response, Finance Minister Ashni Singh had said that any request for support would come in the first instance from the private sponsors of the project and not from the State, although the State would be likely to support any such request. The minister had also noted that the project sponsors were engaged in discussions with the Bank’s private sector arm, the International Finance Corporation and other institutions within the World Bank Group, along with several other sources of financial and non-financial support for the project.

The Rusumo project
The Rusumo project

In the last few months, as a debate raged on Amaila, one of the main arguments was that the project was overpriced and that a better arrangement could be clinched with experienced, longstanding institutions like the World Bank.

In announcing approval of financing for the Rusumo Falls Hydroelectric Project, the World Bank said that it is the first operation under the World Bank Group Great Lakes Regional Initiative inaugurated by World Bank Group President Jim Yong Kim during his historic joint visit with UN Secretary General Ban Ki-moon in May 2013.

The project will construct a run-of-river hydropower facility with envisaged installed capacity of 80 MW consisting of the power station and hydraulic infrastructure (power generation facilities, intake, headrace tunnel, surge shaft/chamber, powerhouse and tailrace channel) and; transmission facilities connecting the hydroelectric power plant of Rusumo Falls to the national grids of Rwanda and Burundi, and supply electricity to the western provinces of Tanzania, which are currently not connected to the country’s national grid.

“The overall project cost is US$468.60 million and its eventual 80 megawatt generation capacity will boost reliable power supply to the electricity grids of Burundi, Rwanda and Tanzania, reduce electricity costs, promote renewable power, spur job-led economic development and pave the way for more dynamic regional cooperation, peace and stability among the countries of the Nile Equatorial Lakes (NEL) sub-region in east Africa,” the statement by the World Bank said.

The World Bank financing of US$340 million – US$113.30 million to each of the governments of Burundi, Rwanda and Tanzania comes from the International Development Association (IDA), the World Bank’s fund for the poorest.

According to project documents, Component Al (Civil Works) comprises all excavation/earth works, tunneling and concrete for the power plant complex structures, including a barrage and gated spillway, intake works and diversion/power canal, surface powerhouse, access roads and construction site facilities such as offices and housing at a cost of US$155 million to be funded by the Bank.

The Bank will also finance Component A2 (Mechanical and Electrical Works) the cost of which is pegged at US$126 million and includes supply, installation, testing and commissioning of: hydro-mechanical equipment; turbine-generator sets and auxiliaries; generation substation; and power complex control and communications equipment.

Component A3 which deals with social and environmental impacts mitigation has a US$22 million cost being financed by the Bank. This component will finance the Environmental and Social Management Plan (ESMP) and the Resettlement Action Plan (RAP) including cash compensation to approximately 664 project affected households and implementation of the associated Livelihood Restoration Program and the Local Area Development Plan (LADP).

Component A4 (Owner’s Engineer and Project supervision) will also be financed by the Bank to the tune of US$37 million. This component will finance an Owner’s Engineer to assist the Project entity with: overall project management and supervision of the procurement, design, construction, interface management and preparation for operation and maintenance of the power plant complex; and coordination of the implementation of the ESMP RAP.

This component will also finance staff costs to support the set-up operations of the Rusumo Power Company Limited (RPCL) and NELSAP Rusumo Project Implementation Unit (RPIU) including a project manager, senior engineers (civil, electrical and mechanical), a quantity surveyor, a safeguards team, a procurement specialist, a financial management specialist, accounts and logistics assistant, a communications specialist and other technical staff. In addition, this component will finance equipment, capacity-building and monitoring/evaluation activities of the project.

Component B is for Transmission Lines with the cost pegged at US$128.6 million. This would see financing from the Africa Development Bank and others. This component will consist of construction of three transmission lines from Rusumo to: (i) Gitega, Burundi (161 km); (ii) Kigali, Rwanda (119 km); and (iii) Nyakanazi, Tanzania (98.2 km). They will connect the power station at Rusumo to the national grids of Rwanda and Burundi, and supply electricity to the western mining provinces of Tanzania, which are currently not connected to the country’s national grid. The transmission lines are expected to play a role in the creation of a regional grid “backbone” for expanded future power trade within the region.

“This landmark project will have transformational impact, bringing lower-cost energy to homes, businesses, and clinics in Burundi, Rwanda and Tanzania,” Colin Bruce, the Director of Strategy, Operations and Regional Integration was quoted as saying. “By connecting grids, people and environmentally sensitive solutions, the project will help to catalyze growth and to encourage peace and stability in the sub-region,” he said.

The Bank had said that lack of access to electricity is a defining constraint in the region. Only four percent of the population in Burundi has access to electricity, corresponding numbers for Rwanda and Tanzania are 13 and 15 percent respectively.  All three countries will benefit from job created by construction and installation activity associated with the power plant.  By choosing a run-of-the-river option to reduce social and environmental impacts, the participating governments have demonstrated careful and responsible decision-making, the World Bank said.

“The Rusumo Falls Hydroelectric Project takes a regional approach to tackling Sub-Saharan Africa’s power crisis, providing low-cost, clean, renewable energy to people in Burundi, Rwanda and Tanzania,” said Jamal Saghir, World Bank Director for Sustainable Development in the Africa Region. “The new power plant signals the Bank’s commitment to keeping the lights on across the African continent, necessary for achieving growth, ending poverty and boosting shared prosperity in the region.”

According to the Bank’s statement, while other parts of Sub-Saharan Africa are experiencing high growth rates, countries of the Great Lakes sub-region have had extremely high levels of poverty and very low levels of key services such as access to electricity. Yields from agriculture also are typically quite low.  The approval of the Regional Rusumo Falls Hydroelectric Project is anchored in the World Bank Group’s development approach to the region pegged to increase power generation and interconnectivity to take advantage of low-cost and renewable sources of hydropower and shared infrastructure development.   The project will strengthen the capacity of the Nile Equatorial Lakes Subsidiary Action Program (NELSAP) and its emergence as a regional center of excellence, the statement said.

“The project’s regional approach to infrastructure development will help to lower costs, enable joint management of the hydropower generation and transmission system, and demonstrate mutual benefits attainable by sharing of river waters as a catalyst for greater economic integration,” the statement said.

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