Project detail - KIKAGATI POWER COMPANY LTD

Who is our customer

The Borrower is Kikagati Power Company Limited (“KPCL”), a special purpose vehicle established to develop, construct and operate a 14MW run-of-river hydro power plant located on the Kagera river in the south west of Uganda (65km south of the city Mbarara). The river forms the natural border between Uganda and Tanzania, with the majority of the project equipment being located in Uganda. KPCL is wholly owned (through holding companies) by the Africa Energy Renewable Fund LP, a USD 200 mln fund which is managed by Berkeley Energy Africa Limited. The project is being developed under the KfW led GET FiT program.

What is our funding objective?

The funding is targeted towards the development and construction of the 14MW Kikagati hydro plant. FMO is the lead arranger for the approximately USD 48 mln senior debt tranche. FMO intends to provide 50% itself, and catalyse 50% from Emerging Africa Infrastructure Fund (“EAIF”) managed by Investec.

Why do we fund this investment?

The transaction is expected to have a high development impact. It is the first cross border Independent Power Producer (“IPP”) Project between Uganda and Tanzania, which will support the economic development of both countries, especially the underserved regions where the Project is located, and promote further integration of the East African Power Pool. The project is expected to generate around 113 GWh clean energy per year, serving the equivalent of 233,489 people and has an annual avoided GHG rate of 48,506tCO2eq. Half of the electricity generated by the Project will be provided to Tanzania. Uganda and Tanzania are rapidly growing economies, but suffer from historic underinvestment in the power sector. In Uganda this is among others being addressed by the capacity addition targeted under the GET FiT program. FMO is additional in this transaction by providing debt with a 16y tenor which is not available on the market in East Africa. FMO intends to catalyse an equivalent amount from EAIF.

What is the Environmental and Social categorization rationale?

The Project qualifies as an E&S Category A (high risk) project according to IFC PS because: there is a cross-border component to the Project; construction of the Project and its infrastructure will result in economic displacement of 54 households/institutions in Uganda and 56 households/institutions in Tanzania, who will lose land, associated crops and other assets along the river; only 17 structures in Tanzania will be affected, but the owners have opted for monetary compensation so there is no need for the Project to acquire land and construct new structures for them; compensation to affected communities is almost (90%) completed and once concluded the land acquisition for the Project can be finalised; communities are overall positive about the project and restoration of their livelihoods will be further guided by the Livelihood Restoration Plan; further benefits to host and affected communities will be defined in the Community Development Plan; main biodiversity impacts from the Project are related to movement, feeding and breeding dynamic of hippopotami, crocodile and fish and will be managed and mitigated under the proposed Biodiversity Management Plan; in addition a fish-ladder and an semi-aquatic by-pass have been integrated in the Project design; few community graves have been identified in Uganda and Tanzania and will be relocated in a culturally appropriate manner. FMO’s E&S DD indicates that the Project will have impacts consistent with the following IFC PSs: • PS 1 - Assessment and Management of Environmental and Social Risks and Impacts PS 2 - Labour and working conditions • PS 3 - Resource Efficiency and Pollution Prevention • PS 4 - Community Health, Safety and Security • PS 5 - Land Acquisition and Involuntary Resettlement • PS 6 - Biodiversity Conservation and Sustainable Management • PS 8 – Cultural Heritage The following PS are not seen by FMO as applicable to this project: • PS7 - Indigenous Peoples - there are no known groups of indigenous persons in the project area

More investments

Date	Total FMO financing
12/14/2022	EUR 0.03 MLN