Nairobi, 27 May 2022 – The African Trade Insurance Agency (ATI), through its Regional Liquidity Support Facility (RLSF), has supported the 7.8 MW Nyamwamba II Hydro Project – a run-of-the-river hydropower plant located on the Nyamwamba river in Western Uganda. ATI has issued a guarantee covering the risk of non-payment by Uganda Electricity Transmission Company Limited (UETCL) for the energy to be supplied by Nyamwamba II to the national utility. The RLSF policy will be in the form of a Stand-By Letter of Credit supported by Cash Collateral and Guarantees.
Nyamwamba II is owned by Serengeti Energy Limited, which is an independent power producer (IPP) developing, constructing and operating small to medium-sized renewable energy projects up to 50MW in Sub-Sahara Africa. The energy generated by the project will be sold directly to UETCL under a 20-year power purchase agreement (PPA) and integrated into the Ugandan national electric grid. Serengeti Energy has estimated that the power plant will help avoid yearly carbon emissions by 18,000 tonnes and support access to energy for 160,000 people.
RLSF is a guarantee instrument designed to address the short-term liquidity risks faced by IPPs that sell electricity to state-owned power utilities across sub-Saharan Africa. It is a joint initiative of ATI, KfW Development Bank and the Norwegian Agency for Development Cooperation (NORAD).
Since its launch, RLSF has supported five renewable energy projects in sub-Saharan Africa, with a combined capacity of 116.3 MW. The first RLSF policy was issued in support of the 7.5 MW Mubuga solar PV in Burundi, and since then – the second, third and fourth polices were issued in support of the 21 MW Nkhotakota, the 60 MW Salima solar PV and the 20 MW Golomoti solar plants in Malawi.
Nyamwamba II is the final project that ATI will be supporting under Phase 1 of RLSF. Following improvements made to the existing RLSF structure, ATI will issue guarantees directly to the IPPs under Phase 2 – this replaces the current product structure where collateral is provided to a bank which then provides Stand–by Letters of Credit (SBLCs) to IPPs. The new structure will allow IPPs to benefit from ATI’s positive credit rating of A/A3 (S&P & Moody’s, respectively), an improvement from the current limitation owing to the ratings of most African banks, which is capped at their sovereign’s rating.
Currently, seven of ATI’s member countries have signed a Memorandum of Understanding (MoU) with ATI and can benefit from RLSF. These are Benin, Burundi, Côte d’Ivoire, Madagascar, Malawi, Uganda and Zambia, with the expectation that more of ATI’s twenty member countries will sign up. In addition to making RLSF available, signing of the MoU allows ATI to collect information on the payment behaviour of power utilities to operational IPPs within each member country; from time to time, such information can then be published via ATI’s Transparency Tool.
