The Africa Finance Corporation (AFC), the continent’s leading infrastructure development finance institution, has officially invested in Cameroon’s Nachtigal Hydro Power Company (NHPC).
The 1.2 billion Euro power project will consist of a 420 megawatt (MW) hydro-electric power station as well as a 50 kilometer transmission line.
The financing structure will take a 76:24 debt to equity ratio, with AFC providing 50 million Euros in debt and an additional 18-year interest rate swaps of up to 75 million Euros. Construction is expected to commence by the end of 2018.
Other high calibre lenders participating in the investment consortium include the International Finance Corporation, the European Investment Bank, Proparco (a leading financial services group), Societe Generale (a France-based investment bank), and Standard Chartered.
The project, which is located 65 kilometers north of Cameroon’s capital city of Yaounde, also boasts a variety of sponsors, including: Electricite de France International, which is globally recognised for its expertise in hydro-electricity power and has a shareholding in NHPC of 40%; InfraVentures, the World Bank’s infrastructure project development fund with a shareholding in NHPC: of 30%; and, the Government of Cameroon, which controls the remaining 30%.
This investment into Cameroon’s power sector follows consistent growth in the demand for electricity across the country for both domestic and industrial use. For instance, during the 2012 to 2016 period, demand grew at a Compound Annual Growth Rate of 7.6%, from 4.2TWh to 5.7TWh in the grid to which Nachtigal will connect. Currently, demand in the grid to which Nachtigal will be connected is expected to more than double by 2030.
At the same time, Eneo Cameroon S.A., the country’s main electricity company, and off-taker to the NHPC, has delivered significant operational improvements.
The decision to go forward with the Nachtigal hydro project was based on its potential to drive economic development while also considering its wider impact. The NHPC will be the cornerstone of Cameroon’s low carbon development plan, which is part of a larger global drive to combat climate change.
“Cameroon is a textbook example of a nation that has, in recent years, demonstrated a deep-rooted commitment to surmount its power deficit challenges by successfully creating a highly investible sector,” said AFC President and CEO, Samaila Zubairu following the announcement.
“The financial close of projects such as these and the Kribi IPP are a testament to their earnest efforts. Moreover, with the International Monetary Fund having raised Cameroon’s economic growth outlook to 4.2% from 2017’s 3.2%, we are pleased to be investing in the country’s essential infrastructure that will help unlock further economic growth in the years to come, and for the people of Cameroon reach their developmental aspirations,” he concluded.