Africa Finance Corporation, the leading infrastructure development finance institution in Africa, will invest in the Nachtigal Hydro Power Company, or NHPC, located 65 km north of Yaounde in Cameroon.
The €1.2 billion power generation project will consist of a 420 MW hydro-electric power station as well as a 50 km transmission line. The financing structure will take a 76:24 debt to equity ratio, with AFC providing €50 million in debt and an additional 18-year interest rate swaps of up to €75 million.
Other high calibre lenders participating in the investment consortium include the International Finance Corporation, European Investment Bank, Proparco, Société Générale and Standard Chartered, with the following as project sponsors:
- Electricité de Farance International, globally recognised for its expertise in hydro-electric power (shareholding in NHPC: 40%);
- InfraVentures, the World Bank’s infrastructure project development find (shareholding in NHPC: 30%); and
- The Government of Cameroon (shareholding in NHPC: 30%).
This investment in Cameroon’s power sector comes following consistent growth in the demand for electricity across the country both for domestic and industrial use. For example, during the 20112 – 2016 period, demand grew at a compound annual growth rate of 7.6%, from 4.2 TWh to 5.7 Twh 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 from 5.7 TWh in 2016 to above 13 TWh 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. This has consequently meant liquidity support for NHPC is stronger that it was for the Kribi Power Development Corporation IPP, which attracted a similar group of lenders.
As is the case with all projects, Africa Finance Corporation participates in, 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 and was selected because it was ranked as the best future hydro project to be developed in the LCDP.
Africa Finance Corporation, the sponsors and the lenders will develop the project in compliance with national and international best practices in terms of environmental and social management and infrastructure building.
“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. The financial close of projects such as these and the Kribi IPP are a testament to their Ernest efforts,” says Africa Finance Corporation president and CEO Samiala Zubairu.
“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 to reach their developmental aspirations.”
Construction of the hydro-electric power station is expected to commence by the end of 2018.