Thursday, Jul 7, 2022
International Finance

IFC financing advances record-setting scaling solar project in Zambia

The equity for the project is provided by Neoen/First Solar and the Industrial Development Corporation of Zambia

IFC, a member of the World Bank Group, has finalized financing for the construction of Zambia’s first large-scale solar power plant – the first project to be developed, tendered, awarded, and financed under the World Bank Group’s Scaling Solar program. 

Financing agreements have been signed between Bangweulu Power Corporation Limited — sponsored by Neoen/First Solar and Zambia’s Industrial Development Corporation (IDC) — IFC, and the Overseas Private Investment Corporation (OPIC) in Lusaka, Zambia. Neoen and First Solar have now issued a ‘notice to proceed’ for the construction of the new 47.5MWac facility, whose low-cost renewable power will help the country cope with droughts that have afflicted its hydropower facilities. 

The equity for the project is provided by Neoen/First Solar and the Industrial Development Corporation of Zambia (IDC). The financing package includes senior loans of up to $13.3 million from IFC, up to $13.3 million from the IFC-Canada Climate Change Program, and up to $13.3 million from OPIC, along with an interest rate swap from IFC and a partial risk guarantee from the International Development Agency.   

Neoen/First Solar were one of two winners in the inaugural Scaling Solar tender in Zambia, setting a new benchmark for solar tariffs in sub-Saharan Africa, with a ground-breaking 6.015 cents/kWh tariff, which will remain fixed for 25 years.   
“Solar power holds limitless potential for countries in Africa, but for many countries it has been hard to attract and close competitively priced projects with high quality developers,” said World Bank Group President, Jim Yong Kim. “Scaling Solar was designed to fix this and bring investors and governments together in a transparent and streamlined competitive process to enable the private sector to provide a clean energy future for Africa. Universal access to energy — especially clean, affordable energy — is essential for developing nations to grow and for people to reach their full potential, and Scaling Solar has proven it can help deliver this.” 

Zambia’s first Scaling Solar tender, which was designed and tendered based on the Scaling Solar approach under the guidance of IFC’s Advisory Services team, attracted significant international investor interest, receiving seven bids. The Neoen/First Solar plant will have a capacity of 47.5MWac and will be constructed in just 9.5 months using First Solar panels. The other winner of the first-round tender, Enel of Italy, is expected to reach financial close on its 28.2MWac plant in the coming months.   

“Once again we demonstrate our ability to gather support from major investors such as IFC and OPIC for a project with remarkable impact,” said Xavier Barbaro, CEO of Neoen. “We are proud to be giving Zambia its first high-power solar park in this initial stage of the Scaling Solar programme and to be offering a competitive rate that constitutes a record for Sub-Saharan Africa.” 

Over half the global electricity access deficit is in Africa, with 2014 figures showing over 600 million people still lack access to electricity. This is more than half the people living in Sub-Saharan Africa. 

“Scaling Solar is a game changer for Zambia and other countries facing electricity shortages,” said Philippe Le Houérou, IFC’s CEO. “The successful close of Scaling Solar is proof that we can find innovative ways to reduce risks that encourage private sector investment and deliver affordable renewable energy for countries in Africa and around the world.” 

For Zambia, a country highly dependent on hydropower, lower than expected rainfall over several years led to acute energy shortages and load-shedding of up to 10 hours a day. This was a severe barrier to the country’s economic development. 
“The package of bankable documents, transaction structuring advice, and research that Scaling Solar provided helped attract more competitors, ensured a successful process, and delivered record breaking low prices,” said Mateyo C. Kaluba, Chief Executive Officer of IDC Zambia. “Diversifying our energy mix and expanding our installed capacity will allow us to power Zambia’s socio-economic development. We look forward to continuing on this path with Scaling Solar on a new round of projects for 500MWac of solar energy.” 
Scaling Solar is now developing over 1.2 gigawatts of solar power in partnership with four African countries Zambia, Ethiopia, Madagascar and Senegal, and 12 companies have already been pre-qualified for Zambia’s second round of Scaling Solar tenders. In addition, the program is expanding to new regions with countries in Asia, Latin America, and the Middle East in discussions to join Scaling Solar. 

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