Fundraising

Sierra Leone’s first IPP gets $136m debt boost

Risk mitigation instruments are being designed by World Bank agencies to support the reforms needed to make the 57MW project financially viable.

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The International Finance Corporation is leading a group of lenders that have agreed to provide long-term financing to the Western Area Power Generation Project in Sierra Leone.

The facility, set to become the country’s first Independent Power Project, has received a $27 million commitment from the World Bank’s private investment arm. The IFC in turn acted as the lead arranger and interest swap provider of a further $109 million raised from other development finance institutions.

These include the African Development Bank, the UK’s CDC Group, the Emerging Africa Infrastructure Fund and the Netherlands’ FMO. The project is sponsored by CDC, whose stake is managed by portfolio company Globeleq, and Abu Dhabi utility TCQ Power.

The project calls for the development, construction and operation of a 57MW heavy-oil-fired power plant in an industrial zone about 4km away from Freetown, Sierra Leone’s capital. Electricity generated by the facility will be sold to Electricity Distribution and Supply Authority, the national utility, under a 20-year power purchase agreement.

The formerly war-torn country has long suffered from under-investment in its power generation and distribution sectors. IFC estimates that transmission losses amount to 38 percent, among the highest in Africa. Grid access is still low and load shedding remains a regular occurrence. ESDA recently ran into troubles including fire incidents and corruption investigations.

The IFC emphasised that the project’s success will depend on the rollout of reforms in Sierra Leone’s power sector. This programme, the institution said, is being supported by a number of risk-mitigation initiatives the World Bank and its agencies are working on to make private investment viable in the country.

The International Development Association is putting together a partial risk guarantee to back the rehabilitation and upgrade of the national distribution network. The Multilateral Investment Guarantee Agency is also looking to offer a political risk guarantee to cover equity investments, shareholder loans and retained earnings.