AfDB pumps 374.9bn/- loan for Kakono power project

THE government has signed a loan agreement of 161.47 million US dollars (about 374.9bn/-) with the African Development Bank (AfDB), to implement Kakono Hydropower Project (Kakono HPP).

The approximate cost of execution of the Kakono HPP is 325 million US dollars (about 750bn/-).

Speaking during the signing ceremony in Dar es Salaam yesterday, Minister for Finance and Planning, Dr Mwigulu Nchemba said the overall development objective of Kakono HPP is to increase on-grid energy production from least-cost renewable sources to address electricity deficits in north-western Tanzania.

Dr Nchemba said the government had requested AfDB and the French Development Agency (AFD) to consider financing the project to enable the Lake Zone residents get reliable electricity.

“As you might be aware, the Lake Zone is a highly productive area demonstrated by the fact that it accounts for the largest share of the value of minerals and fish traded in Tanzania, which also demand cost efficient and reliable source of power,” he said.

However, he said over a decade, the zone had been characterised with the use of costly diesel power plants and the operational inefficiencies such as the high network losses.

“We are happy that on March 7th, 2023, the government signed an agreement with AFD on its portion amounting to 110 million USD (about 272.6bn/-) and today we have just signed a loan agreement with AfDB amounting to 161.47 million US dollars (about 374.9bn/-),” said Dr Nchemba.

In addition, he said the remaining portion not signed out of the total project cost is a grant from the European Union (EU), which will be administered by AFD amounting to 35 million Euro (about 86.7bn/-).

However, Dr Nchemba requested the grant arrangement between AFD and EU to be expedited in order to have a full package of financing ready for the project.

Dr Nchemba said the development of Kakono HPP will displace the use of fossil fuels in the north-western of Tanzania, where costly diesel power generators are often brought online to either supplement the grid supply or improve the quality of supply to avoid prolonged blackouts and brownouts.

He said the Kakono HPP is in line with Third Five-Year Development Plan (FYDP III) and part of a broad agenda of the sixth phase government that seeks to build a competitive and industrial economy for human development through improving productive infrastructures, reliable access to energy, strengthening the business and investment enabling environment as well as education and training systems.

He noted that “the project is also well aligned with the current AfDB’s Country Strategy Paper 2021-2025 for Tanzania and operational priorities commonly known as High Fives, particularly industrialising Africa, feed Africa and improving the quality of life for the people of Africa as well as AFD priorities”.

The minister said the project will be completed in five years and will involve the construction of 87.8 MW hydropower plant and other works, including a primary school, health centre and improving the living standard of the communities around there.

He said the government will continue working closely with the AfDB, AFD and the EU to strengthen the development cooperation.

He noted “With strong relationship, we shall be able to achieve our national and international development aspirations”.

Further, he said the government will take all necessary measures to ensure successful implementation of the project.

On her part, the AfDB Tanzania Country Manager, Dr Patricia Laverley said they were satisfied with the capacity commitment that the government has demonstrated in the past.

“The Kakono Hydropower loan agreement which we have signed today demonstrates our commitment as development partners in supporting Tanzania’s development aspiration of becoming an upper middle –income country,” she said.

She said the AfDB total active portfolio in Tanzania is 2.7 billion US dollars (about 6.3tri/-), of which 86 per cent was in energy, water, sanitation and transport.

Dr Laverley insisted that AfDB will remain a committed partner in achieving the country’s development aspirations.

“We will work with the government to ensure the successful implementation of the entire active project in our portfolio,” said Dr Loverley.

AFD Country Director -Tanzania Office, Ms Celine Robert said signing of the agreement marked a new milestone in the important work and efforts of the country to achieve its vision 2025 for the energy sector.

Ms Robert said AFD is proud to contribute to a project that is fully in line with international climate objectives and AFD’s strong commitments in that regard.

She said the project will comply with the best international standards as far as environmental and social risk safeguards were concerned and especially thanks to the financial support provided by the EU.

“The energy sector is our most important sector of intervention with six projects for a total of half a billion Euros that are implemented by both TANESCO and REA,” said Ms Robert.

In addition, she said that the AFD will continue to invest in the energy sector depending on the government’s demand and in line with France’s country strategy.

On his part, the EU Head of delegation to Tanzania and East Africa, Mr Cedric Merel said the contribution of EU’s 36 million Euro grants will provide the indispensable elements of technical assistance, environmental studies and capacity building.

“The project will add 87,8MW to Tanzania’s national grid and will reduce GHG emissions by 213,810 tons per year, therefore a significant contribution to economic development and to climate change adaptation,” said Merel

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