The Emerging Africa Infrastructure Fund (EAIF) has signed a $27m loan to Kikagati Power Company Ltd (KPCL), which is building a 14MW run-of-the-river hydro electricity generating station at Kikagati on the Kagera River. 

KPCL is backed by the Africa Renewable Energy Fund, a $205m fund managed by Berkeley Energy.

The Uganda Electricity Transmission Company, Uganda’s single-buyer and transmission company, will buy 100% of the energy generated, which will then sell half the energy on to Tanzania.

The Kikagati plant is the 10th renewable energy development EAIF has backed in Uganda, demonstrating the benefits of replicating experience, financial structures and legal documentation. 

The EAIF has financed 138MW of renewable generating capacity in Uganda to date, representing a total investment of $126m.

Uganda has one of the world’s lowest rates of electrification, with an average national rate of 20%, falling to as low as 6% in rural areas. Kikagati’s rural location means that villages and businesses in the immediate area stand to benefit from the reliable and affordable power the plant will supply.

KPCL’s plant is to consist of an 8.5m-high dam of 300m in length, three turbines of 5.5MW each and associated earthworks, control and plant rooms and allied infrastructure connecting the plant to switchyards in Uganda and Tanzania. 

Around 250 people are involved in construction work. Once operational, around 10 permanent staff will run the plant.

FMO, the Dutch development bank, was mandated lead arranger of the project financing, and is lending $27m. 

The EAIF and FMO loans are over 16 years, a term that improves the long-term viability prospects of the project.

The Kikagati plant will benefit from the “GETFiT” programme, which is funded by a number of European governments and the European Union. 

It provides a tariff subsidy to a number of renewable energy facilities across Uganda. 

GetFiT funding brings down the average cost of power to consumers.

The Kagera River on which Kikagati is located forms the natural border between Uganda and Tanzania. 

The Project has been made possible through the close collaboration of the developer with the two governments.

Emilio Cattaneo, EAIF Executive Director, said: “The Kikagati hydro power station will strengthen the economic development foundations of Uganda and Tanzania and provide good jobs in construction and operation. EAIF is now one of the most experienced providers of competitive long-term project finance to the African renewables energy industry. This is good for Africa, for employment and poverty reduction. Green energy is powering progress.”