AFD support to geothermal development

Kampala, UgandaSeptember 20, 2011

Maitane ConcellonProgramme Officer Energy & Climate

AFD Nairobi

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The AFD Group1

A public Development Financial Institution (DFI), operating in nearly 70 countries

4 complementary entitiesAFD (Development Financial Institution)PROPARCO (dedicated to private sector)FFEM (French Global Environment Fund)CEFEB (Training Institute)

7 Billion € committed in 2010 (half in Africa)

Diversified tools: concessionnal loans/near market condition loans; sovereign/non sovereign loans; loans to the private sector; guarantees; technical assistance and grants

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AFD Energy Strategy2

Sustainable EnergyEfficient, (C) lean, Renawable

Energy SecurityGeneration, Interconnections,

Regulation, PPP

Energy AccessGrid, Off-grid,

Biofuels

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Main lines of intervention in EAC

Development of renewable energy Bujagali in Uganda: 250 MW Hydro Power on Nile river (Commissioning April 2012) Olkaria I & IV: 280 MW of geothermal power generation in Kenya Support to the development of geothermal energy in Ethiopia Interest in financing the Ruzizi III hydropower plant

Access to energy in rural and suburban areas Rural and urban electrification projects in Kenya Connection Revolving Fund in Kenya allowing connection of low-income households

Promoting energy efficiency and demand-side management Distribution of energy-saving bulbs to low-end residential customers in Kenya Renewable Energy and Energy Efficiency credit line for private sector investment in

Kenya, Tanzania and Uganda

Strengthening infrastructure and regional integration Mombasa – Nairobi 400 kV transmission line Nairobi Power Transmission Ring Regional interconnection: Ethiopia – Kenya 500 kV DC line

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AFD’s support to geothermal in EAC4

Financing of geothermal generation facilities Contribution to a 35 MW extension of Olkaria II by KenGen (AFD) Construction of a 280 MW power generation plant in Olkaria I & IV by KenGen (AFD) Financing of a 48 MW extension at Olkaria III generation plant by Orpower (Proparco)

Financing for geothermal exploration and drilling Support to exploration through the financing of 2 drilling rigs for the GDC (AFD) Contribution to the development of 400 MW at Menengai (AFD, under appraisal)

Capacity Building and Technical Assistance Update of GDC’s Strategic Plan and Business Plan (AFD) Development of GDC’s health and safety procedures (AFD) Considering financing of a regional training center in Kenya dedicated to geothermal

energy for mutualisation of equipment, expertise and knowledge (AFD, under appraisal)

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Diverse financing mechanisms5

Sovereign loan to

Government(AFD)

206 m €

Direct non-sovereign

loan to public utilies(AFD)

20 m €

Lending to IPPs

(Proparco)

15 m €

AFD Group commitments in EAC

Total: 241 million EUR

Focusing mostly in Kenya for the moment but also intending to support the development of geothermal in Ethiopia and Rwanda

Willing to share experiences and explore opportunities for support with other countries in the region (Uganda, Tanzania, etc)

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A case study: Olkaria I&IV

Objective: development of 280 MW power generation plant with KenGen

AFD financing: € 150 M - co-financing with WB, EIB, KfW, JICA (total cost of the project € 982 M)

Scope of financing: drilling, steam gathering network, power plant, transmission network

Key requirements: Field modeling (resource optimization/reservoir simulation studies) Feasibility study for the power plant and the steam gathering

network Environmental Impact Assessment study Power Purchase Agreement Geothermal Advisory Committee Investment and Financing Plan Economic & financial analysis of the project Implementation Schedule Project Steering Committee and Project Implementation Unit EIA license

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A case study: Menengai

Objective: 400 MW wellfield development with GDC

AFD financing: € 52 M for the purchase of 2 rigs and € 70 M contribution for drilling materials/consultancy and steam gathering network

Co-financing with ADB and WB - Total project cost approx. € 600 M

Scope of financing: production drilling, steam gathering network and feasibility study for the power plant

Key requirements: Surface exploration, exploration and appraisal wells completed Feasibility study for the steam gathering network Environmental Impact Assessment study Geothermal Advisory Committee Investment and Financing Plan Economic & financial analysis of the project Implementation Schedule Project Steering Committee and Project Implementation Unit EIA license

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Mobilising ressources for geothermal development in Africa

Strong interest in supporting geothermal development in Africa – from small-scale to large scale interventions possible

Need to ensure strong Government commitment, sound national energy policies, sustainability of the sector (tariffs, financials of public utilities…)

Inclusion of geothermal in national least-cost energy development plans

Resources are limited, needs are huge – need to diversify financing and optimize complementarity between investors/donors to leverage existing resources Grants from donors for early stages to demonstrate potential (site identification, resource

exploration), feasibility studies, capacity building Development banks for infrastructure investment (wellfield development /power plant) -

requires strong Gov commitment and sound public finance/debt sustainability situation Private sector for wellfield development and power plant construction

strong risk mitigation policies/cost sharing required for resources assessment and well field development

strong sovereign guarantees/investment promotion policies required even at later stages of the value chain (well development and power plant development)

not a costless option for Governments either

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ASANTE SANATHANK YOU

MERCI