Uganda is abundantly endowed with energy resources, and they are fairly distributed throughout the country too.
So rare opportunities come knocking at the East African Community Member state, very often, and it is for this reason that the country has become the first African country to sign an agreement with the Regional Liquidity Support Facility (RLSF), a joint initiative of the African Trade Insurance Agency (ATI), a Pan-African and multilateral guarantor and KfW with funding from German Ministry of Economic Cooperation and Development.
Under this program, RLSF will offer protection to new small and mid-sized renewable energy projects (up to 50 MW) in Sub-Sahara Africa.
According to World Bank estimates, the continent needs to generate annual capacity of 7,000 MW but such a ramp-up in generation capacity cannot be achieved without private sector participation. The RLSF, as a pragmatic option, could therefore become a more widely used solution to solve Africa’s energy deficit challenge.
The RLSF has an initial capacity equivalent to $74 million and will protect Independent Power Producers (IPPs) against the risk of delayed payments by public off-takers. This type of guarantee is a common requirement from the banks that fund the projects. Many projects have failed in the past to access funding because this guarantee was not available.
Government statistics from Uganda indicate that the total energy consumption in Uganda is estimated at over 5 million tons of oil of which 93% is derived from biomass (wood/ charcoal and agricultural residue); electricity and oil products constitute 7%.
Uganda generates its own electric power from Nalubaale, Bujjagali, Kilembe, Mpanga, Nyangaki, Bugoye hydropower stations, and thermal stations.
The move to form this partnership reflects Uganda’s commitment to ensuring the viability of small and medium-scale renewable energy projects.
Speaking during the signing ceremony, Honorable Matia Kasaija, Uganda’s Minister of Finance, Planning and Economic Development commented on the government’s commitment to improving conditions for investors within the energy sector. “Uganda has a solid history of supporting our public concession with upwards of USD500 million spent in the last decade on improvements to the grid. With this agreement, we see RLSF providing a perfect complement to our on-going strategy of accelerating the delivery of clean energy to the national grid.” He said.
This now gives the necessary comfort to developers and lenders to invest in renewable energy projects. GET FiT has been a success in Uganda, attracting 19 IPPs in the last five years. Under the RLSF program all renewable IPPs that have not reached financial close, as well as new IPPs can apply for the product.
“RLSF is a tool that can ensure more renewable energy projects reach financial close. For Africa, small and mid-sized projects may be a better fit to the current environment requiring less financing and they can be implemented much quicker. This could be a model that works in many other African markets that may just pave the way for an expansion of the facility or other such initiatives,” noted George Otieno, ATI’s Chief Executive Officer.