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AfDB Approves US $348 Million for Kenya-Ethiopia Electricity Highway

PROGRAM/PROJECT NEWS

20 September 2012 – The Board of the African Development Fund has approved US $348 million in funding for a US $1.26-billion electricity highway project between Kenya and Ethiopia.  Due for commissioning in November 2017, the project involves the construction of a 1,068-kilometre high-voltage direct current 500 kV transmission line between the two countries. It also includes converter stations at Wolayta-Sodo (Ethiopia) and Suswa (Kenya), with a power transfer capacity of up to 2,000 MW.

The project is intended to promote power trade and regional integration, contribute to the Eastern Africa Power Pool (EAPP) countries’ social and economic development, and reduce poverty in those countries.

“With the approval of this project, we have solidified our position as the key strategic partner for East African countries in the power sector,” said Gabriel Negatu, AfDB’s Regional Director in charge of East Africa. “Our involvement in the project has included a leading role in the preparation of the project and financing some of the feasibility studies required to appraise the project and make it bankable. We have mobilized funds from other development partners in a timely and efficient manner. The project is also perfectly aligned with the climate change mitigation and adaptation strategy of the Bank, as it has the potential to replace some fossil-fuelled thermal generation in the East African region.”

The project has been co-financed with the World Bank, the French Development Agency (AFD) and the Governments of Kenya and Ethiopia. This key inter-country power link comes at a time when demand for electricity in the East African region has steadily risen relative to supply, leading to occasional severe power shortages. To alleviate this situation, East African countries have had to resort to exorbitantly expensive power from emergency generators. However, the region is blessed with a great variety of natural resources, in particular hydropower, mainly concentrated in Ethiopia.

The integration of the power systems of the EAPP will enable the development of Ethiopia’s large hydropower resources for the export market and address power shortages throughout the region. The project will position Ethiopia as the main powerhouse and Kenya as the main hub for power trade in the East African region. However, it is anticipated that power will flow in both directions: from Ethiopia to East African countries all the way to the Southern African Power Pool in the short term, and/or from the Eastern and Southern power pools to Egypt and Sudan in the long run.

In Kenya alone, the additional power injected into the national grid will enable the supply of electricity to an additional 870,000 households by 2018, and a cumulative total of 1.4 million additional households by 2022, of which 18 per cent will be located in rural areas. Businesses and industries will also benefit, with around 3,100 GWh of additional energy by 2018, increasing to around 5,100 GWh by 2022.

“The East African region is blessed with abundant energy resources which have remained untapped for some time, in particular hydropower and geothermal. With the implementation of this flagship project, which is meant to be an anchor link in establishing the backbone of the EAPP, energy resources can be pooled at the regional level to create a regional electricity market through power trading,” said Thierno Bah, AfDB’s Senior Power Engineer.

“Power trading will ensure enhanced power security for the EAPP countries and result in cost savings for the electricity companies and ultimately lower tariffs for end users. The two electricity companies, Ethiopian Electric Power Corporation (EEPCO) in Ethiopia and Kenya Electricity Transmission Co. Ltd. (KETRACO) in Kenya, will also benefit from additional revenues from carbon credits with the innovative Clean Development Mechanism (CDM) methodology developed by the Bank and recently approved by the CDM methodology panel,” he added.

The World Bank approved funding for this project in July.

To see the Project Appraisal Report, go to http://www.afdb.org/fileadmin/uploads/afdb/Documents/Project-and-Operations/Ethiopia-Kenya%20-%20%20Ethiopia-Kenya%20Electricity%20Highway%20-Project%20Appraisal%20Report.pdf

The African Development Bank (AfDB) is a regional multilateral development finance institution established in 1964 to mobilize resources towards the economic and social progress of its Regional Member Countries (RMCs). It is headquartered in

Abidjan (Côte d’Ivoire). Since beginning operation in 1966, the Bank has become a key player in promoting economic and social development in African states.  The African Development Fund established in 1972 and the Nigeria Trust Fund established in 1976, constitute with the AfDB as the flagship, the African Development Bank Group. For more information, visit www.adbg.org.

Source: African Development Bank