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Upfront Subsidy for the CLSG Power Interconnection project

Region
Western Africa
Sector
Energy
Scope
IRS
Grant Amount
EUR 12,500,000
Total project cost
EUR 374,400,000
Status
Approved
PFG Lead Financier
EIB
PFG co-Financier
KfW, AfDB

The CLSG Interconnector project involves constructing a 1,357 km transmission line allowing power exports initially from Ivory Coast to Liberia, Sierra Leone, and Guinea. The interconnector aims to create incentives to explore the hydropower potential in Sierra Leone and Guinea which, if realised, would provide all the countries with an increased supply of electricity to meet growing demand. Approximately 12.5% of the total project cost will finance rural electrification.

As at June 2016, the project is in the investment stage. Following a prequalification, all the tenders for the works have been launched. Work on the fulfilment of conditions precedent to disbursement continues in cooperation with other donors and the WAPP. This includes in particular the need to finalize the documentation related to the commercial framework  (PPA and TSA). The works on the interconnector are expected to start in 2017.

The upfront subsidy of maximum EUR 12.5 million will be used to reduce the interest rate on the EIB loan to Sierra Leone to meet concessionality requirements in line with the terms of the loans of the other financiers of the project. In addition, the upfront subsidy will limit the financial risk of the project in the early years of operation, by reducing the costs of the Special Purpose Company during this ramp-up period. Indeed, the financial projections for the project show that lower than expected trading in the early years of operation of the line would generate insufficient revenue from transmission tariffs, which have to remain affordable, to cover all costs incurred. The upfront subsidy would apply during the first three years of operation.

06/2016