Cameroon - Multilateral Investment Guarantee Agency (MIGA) a member of the World Bank Group has provided EUR 164.5 million in guarantees for the construction of the Nachtigal Hydropower Project in Cameroon.
The guarantee by MIGA has been issued to provide Breach of Contract cover for up to 15 years to French power developer and operator EDF International, as well as STOA, a French infrastructure investment vehicle that focuses primarily on Africa. Both EDF and STOA have invested in the Nachtigal Hydropower Company.
MIGA guarantees are being provided alongside payment and loan guarantees from the International Bank for Reconstruction and Development (IBRD), and investment, loan and risk management swaps by the International Finance Corp (IFC).
“As a project in an IDA-eligible country, as well as one with significant climate change mitigation benefits, the Nachtigal Hydropower Project is a high priority for MIGA,” MIGA EVP & CEO Keiko Honda said. “Equally importantly, I am pleased this project has mechanisms to help address environmental and social concerns, which are of utmost importance to MIGA.”
The Nachtigal Hydropower Project is a 420MW hydropower plant on the Sanaga River, about 65km north-east of Cameroon’s capital city Yaounde.
The hydropower plant is expected to meet 30 percent of Cameroon’s installed power generation capacity, enough power for 453, 000 households, while preventing emissions of 41 million tons of CO2 over the next four decades.
The hydropower project is being developed on a build-own-operate-transfer basis under a 35-year concession agreement between Nachtigal Hydropower Company and the Republic of Cameroon.
Nachtigal Hydropower Company will sell its generated power under a Power Purchase Agreement with a privately-owned electricity distribution company, Energy of Cameroon (ENEO). One of few hydropower Public-Private Partnerships in Sub-Saharan Africa, Nachtigal Hydropower Company will sell power to ENEO at a rate of EUR .061/kWh – among the lowest tariffs for a hydropower plant.
Nachtigal hydropower plant will be connected to southern Cameroon’s interconnected grid, which represents about 94 percent of the country’s national electricity consumption, comprising major cities such as Yaounde and Douala.
The Nachtigal hydropower plant comes at a time when 60 percent of Cameroonians have access to electricity, and peak demand is expected to quadruple by 2035.
According to 2015 estimates, Cameroon’s power generation capacity is 1,286 MW, of which 60% was hydropower. The country has the third largest hydropower development potential in Sub-Saharan Africa, and forecasts estimate that hydropower will represent about 75 percent of the energy mix by 2023.
Commenting on the transaction, Marie-Laure Mazaud, Deputy Chief Executive Officer of STOA, said "The Nachtigal Dam provides a concrete response to the significant demand for electricity in Cameroon, and is a reference project for the development of similar hydro projects in Africa in the near term. We are pleased to collaborate with the Republic of Cameroon, EDF, IFC and Africa50 to provide sustainable and accessible energy for the Cameroonian population. The social economic impact of Nachtigal project will be huge in terms of local employment and economic growth."