British International Investment (BII), the UK’s development finance institution and impact investor, is to provide up to US$25million to expand access to sustainable energy in Tanzania.
The funding given to renewable energy platform Rift Valley Energy (RVE), which is owned and managed by Meridiam, will support part of RVE’s ambitious investment and development plan for future renewable energy projects, including new hydropower capacity across the country. Such support will contribute to increasing the national grid’s supply of sustainable and affordable electricity to businesses and communities in low-income rural areas.
RVE, a Tanzania-based renewable energy infrastructure development company, is wholly owned by Meridiam, an independent investment Benefit Corporation and an asset manager that specialises in the development, financing, and long-term management of sustainable public infrastructure. Meridiam acquired RVE in 2023 with a view to grow its generation assets.
The national electrification rate in Tanzania is 37% and as low as 24% in rural areas. This financing from BII is expected to support an additional 7.6MW of new renewable energy assets which will provide power to about 170,000 people per year and connect 4000 businesses and households to the grid for the first time. The provision of clean and affordable power to local industries including factories that process tea, veneer, timber as well water treatment plants is expected to create 1800 jobs.
Meridiam’s Deputy CEO and Africa Head, Mathieu Peller, said: “Rift Valley Energy is an investment which is true to Meridiam’s mandate and purpose, and we are pleased to partner with BII to grow the renewable energy projects being developed by the company. This facility affirms our confidence in Tanzania as a market, where the government has clear and ambitious economic development plans which we look forward to supporting through sustainable investment.”
Developing finance
The US International Development Finance Corporation (DFC) has approved technical assistance funding to support the development of a 120MW hydropower project in Madagascar.
Volobe, a run-of-river power plant, will boost the supply of stable and affordable power to millions of people in Tamatave and the capital city, Antananarivo, through a 270km transmission line which is under construction. The Volobe project will increase the country’s electricity generation capacity by approximately 20%, bringing clean energy, jobs, and productivity gains to Malagasy businesses and individuals across the country. The project is managed by the Compagnie Générale Hydroélectrique de Volobe (CGHV) which has Axian and Africa50 as shareholders.
Once operational, the hydropower plant is expected to generate substantial cost savings for JIRAMA (the Malagasy state-owned utility company) and will significantly contribute to Madagascar’s climate agenda.
The new technical assistance facility is a significant milestone that underscores the strategic cooperation between DFC and pan-African infrastructure investor and asset manager Africa50, and their shared commitment to scale innovative and climate-resilient infrastructure across the continent. The project company will deploy the funding into expediting project development activities, accelerating the project’s path to financial close.
DFC Deputy Vice President of the Office of Development Policy, Christopher Walker, said they were proud to support Africa50 in their efforts to advance the development of the hydro projects. “Investments in energy provide people and businesses with reliable and secure sources of electricity to drive development, promote economic growth, and advance job creation,” he said.
Anas Charafi, Senior Investment Director of Africa50, added: “This technical assistance funding by DFC is testament to the strength and strategic importance of the Volobe project which we are jointly developing with Axian. It will help expedite the development of the project, which will support industrialisation and play a key role in decarbonising the energy sector. Africa50 mobilises local and global capital at scale and, working hand in hand with our strategic partners, we aim to fast track the execution of transformative infrastructure projects.”
Volobe will be located on the Ivondro River, approximately 30km from the eastern city of Toamasina, the second largest city in Madagascar. The project harnesses Madagascar’s extensive hydroelectric potential, estimated at approximately 7.8GW, with over 800 hydropower sites with high untapped potential having been identified across the country.
Financial closure of the project is expected in 2025.
EBRD
The European Bank for Reconstruction and Development (EBRD) has signed a €200 million loan package to Ukraine’s main hydropower generation company, Ukrhydroenergo, in an effort to strengthen Ukraine’s energy security after repeated attacks on civil power infrastructure by Russia. The EBRD loan of €100 million, backed by a concessional parallel loan of €100 million from Italy, will provide emergency support to restore and maintain the company’s electricity production needs.
The EBRD, which has now deployed €4 billion in Ukraine since the start of the war, works closely with partners on its lending there. The proceeds of this loan will finance the procurement of critical equipment for two of the state-owned company’s hydropower plants, Dnipro HPP and Seredniodnipro HPP as well as addressing Ukrhydroenergo’s liquidity needs.
Ukrhydroenergo is one of Ukraine’s main suppliers of renewable energy. Since the Russian invasion in February 2022, its assets have suffered more than 50 military strikes, significantly damaging some hydropower plants and racking up around half a billion euros of costs – on top of the extensive cost of destruction caused to the Nova Kakhovska dam and Kakhovska HPP in southern Ukraine on 6 June 2023.
“Supporting Ukraine’s electricity production and the repairs and maintenance of its vital infrastructure in wartime is a key investment priority for the EBRD. This loan package will support stable, uninterrupted and reliable electricity generation, which is a cornerstone for the entire Ukrainian economy,” said EBRD President Odile Renaud-Basso.
“Italy has been a staunch supporter of Ukraine since the beginning of the Russian aggression. Now, we are proudly providing a €100 million loan to support the energy sector. In our capacity as G7 Presidency, we will keep mobilising international support to this key area,” said Italian Deputy Prime Minister and Minister of Foreign Affairs and International Cooperation, Antonio Tajani.
“This agreement is an important step towards modernising and developing Ukrainian hydropower facilities. It demonstrates the international community’s recognition of the importance of our projects for ensuring a stable energy supply in Ukraine,” Ihor Syrota, Chief Executive Officer of Ukrhydroenergo commented, while expressing gratitude to the government of Italy and the EBRD.
Before the Russian invasion, Ukrhydroenergo operated nine hydropower plants on the Dnipro and Dniester rivers, with a total installed capacity of 6.1GW. Due to the destruction of the Kakhovska hydropower plant and the reduction in production capacities of others, the company’s total operating capacity is currently limited to 5.8GW.
The EBRD finance will support the replacement of four hydropower generation units at the Dnipro hydropower plant that were worn out due to extensive exploitation and damage caused by missile strikes, as well as two gantry cranes at the Seredniodnipro hydropower plant, which are crucial for maintaining the hydropower plants efficiently.
The EBRD’s Board of Directors has granted a derogation from the Bank’s Environmental and Social Policy as the war makes it hard to carry out environmental and social due diligence; an independent environmental and social audit will be undertaken within 12 months of the lifting of martial law.
Energy security is one of the EBRD’s five investment priorities in Ukraine (along with vital infrastructure, food security, trade and support for the private sector), and the bank has provided significant finance for electricity transmission company Ukrenergo and gas company Naftogaz. The EBRD has been working with Ukrhydroenergo since before the war on rehabilitating hydro-units on the Dnipro cascade.
In other news, the EBRD is also providing a €28 million sovereign loan to modernise and rehabilitate the Enguri hydropower plant in Georgia. The financing extended to the plant’s operating company, Engurhesi, will be complemented by a grant of €7.05 million from the European Union.
This financing package will fund long-term structural stability works of the Enguri dam, repairs to the underground tunnel and penstock to ensure a more reliable power generation and grid system. In addition, the investment will reduce water leakages in the headrace tunnel and enable additional renewable energy production. Funds will also be used to construct vital infrastructure, such as roads to monitor the dam, improve the safety and reliability of the electricity grid and energy generation, as well as create a fish passage downstream of the Enguri dam.
Built in the 1970s, an energy complex comprising the Enguri hydropower plant and the Vardnili hydropower plants, meets approximately 30 per cent of the nation’s electricity needs and are key to the country’s energy infrastructure, providing a steady supply of power and stimulating economic growth.
The EBRD has been involved in the rehabilitation of the Enguri hydropower plant since 1998, helping to reduce reliance on electricity imports, improve energy security, and support the country’s commitment to a greener and more sustainable future. Overall, the EBRD and its donors have supported the Enguri plant with financing totalling €205 million.
OPEC funding
The OPEC Fund for International Development (the OPEC Fund) has signed its first loan agreement with the Kingdom of Bhutan, in what has been described as a historic milestone in their partnership. The US$50 million loan will support the development of two new hydropower plants, the 45MW Gamri in the east of the country and the 25MW Begana in the west, aimed at strengthening Bhutan’s energy security. Nestled in the Himalayas, Bhutan has enormous hydropower potential, boasting over 35,000MW of clean renewable energy from more than 150 sites nationwide but has so far only developed just seven percent of its hydropower potential.
Bhutan Finance Minister Lyonpo Lekey Dorji said: “Our nation is blessed with abundant natural resources, particularly in hydropower. By diversifying our energy sources, Bhutan is reducing its dependency on imported fossil fuels, stabilising energy costs and promoting job creation in green sectors. Pursuing the development of renewable energy resources supports Bhutan’s commitment to remaining carbon neutral and contributes to our global climate goals.”
Over in Tajikistan the OPEC Fund is also providing the first US$25 million loan to support the construction of the Rogun hydropower plant, a key project of the country’s strategy for renewable energy development and energy security. The loan is the first tranche of a US$100 million OPEC Fund financing facility for the project, which is expected to have a transformative impact on the wider Central Asian region.
“Tajikistan has enormous hydro energy potential and tapping into this natural wealth will strengthen energy security, independence and export capacities,” OPEC Fund President Abdulhamid Alkhalifa said.
The Rogun HPP is described as not only being a monumental engineering project but also a crucial step in securing Tajikistan’s energy future. The 335m high multipurpose dam will be the tallest in the world, and will have a total generation capacity of 3780MW. In addition to meeting Tajikistan’s energy demand, it is also expected to export to neighbouring countries.
World Bank
In the US, the World Bank has approved US$1billion in a second round of additional financing for the DASU Hydropower Stage I (DHP I) Project in Pakistan. This will support expansion of hydropower electricity supply, improve access to socio-economic services for local communities, and build the Water and Power Development Authority’s (WAPDA) capacity to prepare future hydropower projects.
“Pakistan’s energy sector suffers from multiple challenges to achieving affordable, reliable, and sustainable energy,” says Najy Benhassine, World Bank Country Director for Pakistan. “The DASU Hydropower Project site is one of the best hydropower sites in the world and is a game changer for the Pakistan energy sector. With a very small footprint, the DHP will contribute to ‘greening’ the energy sector and lowering the cost of electricity.”
DHP is a run-of-river project on the Indus River about 8km from Dasu Town, the capital of the Upper Kohistan District of Khyber Pakhtunkhwa Province. It is being built in stages and upon completion DHP-I will have a capacity of 2160MW, generating 12,225 GWh/yr. The DHP-II will add 9260–11,400GWh/yr from the same dam.
DHP-I is viewed as being an essential part of Pakistan’s efforts to reverse dependence on fossil fuels and reach 60 percent renewable energy by 2031. This financing will help expansion of electricity supplies and potentially save Pakistan an estimated US$1.8 billion annually by replacing imported fuels, and offset around five million tons of carbon dioxide. The annual economic return of DHP-I is estimated to be around 28 percent.
The World Bank has also approved US$13.6 million in additional financing to supplement the ongoing US$5 million Technical Assistance for Kambarata-1 Hydropower Plant (HPP) Project in the Kyrgyz Republic. The project will support the country’s government in preparation for the hydropower project in an environmentally, technically, financially, and commercially sustainable manner.
Described as being “a transformational regional project aimed at increasing affordable energy supply”, Kambarata-1 will help to enhance energy-water management and clean energy transition in the Kyrgyz Republic and across Central Asia. It is expected to generate an average of 5600GWH/yr — almost half the Kyrgyz Republic’s current output — and reduce annual carbon emissions by five million tons.
The ongoing Technical Assistance for Kambarata-1 Hydropower Plant (HPP) Project for the Kyrgyz Republic has made significant progress since its approval in 2023. This includes the commencement of the project feasibility update, preparation of environmental and social documents, as well as the establishment of a Donor Coordination Committee. The additional financing is needed to ensure comprehensive and in-depth implementation of several critical activities, including:
• Establishing dam safety and environmental and social panels of experts.
• Designing a benefit-sharing plan.
• Structuring the project financing plan and commercial framework.
• Establishing a project company, and other essential activities.
The financing is provided on highly concessional terms through the International Development Association. It comprises a US$11 million zero-interest credit, with repayments eased over 50 years and a 10-year grace period, as well as a US$2.6 million grant, which requires no repayment, from the Central Asia Water and Energy Program (CAWEP). The CAWEP is a multi-donor partnership between the World Bank, the European Union, Switzerland, and the UK, aimed at strengthening regional cooperation on water and energy security in Central Asia under a changing climate.
Unlocking potential
In the UK, members of the hydro industry have welcomed the government’s confirmation of its decision to finalise and implement a new cap and floor investment framework to support the deployment of long-duration electricity storage projects, such as pumped storage hydro.
The British Hydropower Association says this represents a significant step forward in unlocking the potential of LDES and strengthening the UK’s position as a clean energy leader, while energy company SSE added this can unlock investment in critical nation building projects including what will be the UK’s largest natural battery – SSE’s 1.3GW Coire Glas pumped storage hydro scheme.
The announcement by the Department for Energy Security and Net Zero follows a consultation held earlier in 2024 which proposed a cap and floor scheme to encourage LDES investment. An appropriately designed cap and floor scheme will provide a revenue stabilisation mechanism aimed at unlocking significant private investment in long duration electricity storage projects in the UK, in the same way it has unleashed investment in electricity interconnectors.
SSE is progressing its flagship pumped storage hydro Coire Glas project in the Scottish Highlands which could deliver up to 30GWh of storage capacity if built, doubling the total electricity storage capacity in Great Britain today. When commissioned, it would become the UK’s largest natural battery, providing vital back up for renewable power.
SSE Renewables hopes to make a final investment decision on the 1.3GW project pending successfully securing a cap and floor agreement in an appropriately designed scheme.
Robert Bryce, Director of Hydro, SSE Renewables, said the government’s announcement is a massive step forward in delivering more of the flexible homegrown energy the UK needs in its transition to net zero. He believes SSE’s Coire Glas has the potential to be at the forefront of delivering much needed large-scale long duration electricity storage, and this flagship project in the Scottish Highlands can shift the dial on pumped hydro storage.
“We now need to harness momentum from this decision and accelerate at pace with a clear timetable to implement the new framework so clean energy investors like SSE can take positive decisions to unlock investment in these nation building projects,” Bryce added. “SSE will continue to work closely with the government and Ofgem as the regulator and delivery body to support a speedy implementation, so we can unlock investment in Coire Glas and other large scale storage projects to secure the benefits to UK consumers and society that they bring.”
Kate Gilmartin, CEO of the British Hydropower Association, said the announcement about the cap and floor mechanism marks a pivotal moment for the UK’s clean energy future, and the BHA wants to ensure the mechanism is implemented swiftly.
“Time is of the essence in the global race towards clean energy leadership, and the UK has a significant early mover advantage on which we must capitalise,” Gilmartin commented. “With the right framework in place, we can secure the UK’s position at the forefront of this crucial technology,” she said.
The BHA has been campaigning for such a ‘cap and floor’ mechanism to help create vital investment in renewable energy storage. The ‘floor’ provides a minimum revenue certainty for investors, with a regulated limit, or a ‘cap’ on revenues to avoid excessive returns to developers. It’s similar to a scheme which has successfully brought interconnectors, another key technology that will enable flexibility and resilience with the UKs grid infrastructure.
The UK currently has 2.8GW of LDES across four existing pumped storage hydro schemes in Scotland and Wales, including Cruachan in Argyll, and Ffestiniog in Gwynedd, which already play a significant role in providing energy at peak demand.
Fair finance
Financial institutions can be partners for change and have significant influence over the companies they fund. As highlighted by recent research undertaken by Fair Finance Asia when looking into hydropower financing in the Mekong Region, banks and finance institutions can transform the hydropower sector by holding companies accountable for their environmental and social practices. Ultimately, they can ensure these projects meet higher ethical standards.
According to Bernadette Victorio, Programme Lead of Fair Finance Asia, there is still a need for financial institutions to develop more robust, transparent and accountable policies that align with international sustainability standards, including those addressing human rights violations and ecological degradation.
With many financial institutions based in Thailand and Vietnam investing in hydropower projects across borders, particularly in Laos, cross-border financing has become a critical aspect in the Mekong Region, where financial institutions from one country fund hydropower projects in another.
Such cross-border investment can complicate accountability because countries’ regulatory standards and sustainability principles will vary. In this context, Victorio emphasises the need for more harmonised policies to transcend national borders, ensuring that these projects’ ecological and social impacts are mitigated across the entire region. Stronger regional cooperation, particularly among Mekong countries, is also necessary to ensure cross-border investments adhere to sustainable practices.
With financial institutions holding the power to influence the future of energy development in the Mekong Region, their investment decisions will have long-lasting impacts on the environment and local communities.
“Our primary call is for financial institutions to develop and disclose an overarching human rights policy and due diligence process aligned with the United Nations Guiding Principles on Business and Human Rights when investing in this sector. So, this is the first line of call for them to develop and disclose sector policies in line with hydropower while diversifying their sources of information when conducting risk assessments,” Bernadette Victorio said. “And by diversifying their sources, I mean they do not only rely on the companies to provide the risk assessment information, but also conduct broader consultations with impacted communities and other independent stakeholders that could provide more nuanced and detailed information on what would be the cumulative negative impacts of these projects.”
Risky business
Droughts and heatwaves create significant financial risk for hydropower suppliers, and although many suppliers manage their risk independently, some are government-supported. Research recently undertaken provides a framework to address how the costs of a government-supported risk management strategy compare with a self-supported one. This was applied to the Bonneville Power Administration (BPA) – a hydropower supplier in the US with access to a government-supported line of credit. Including models to simulate weather, electricity prices, and BPA’s operations, the analysis results suggest government support effectively mitigates BPA’s hydrometeorological financial risk, but at costs to taxpayers that can exceed US$1 billion over 20 years. Replacing the line of credit with index-based insurance comparably manages financial risk at lower costs limited to BPA and its customers.
It is thought the framework may prove useful to both hydropower suppliers and governments as they decide how to manage hydrometeorological financial risk, especially in lower-income countries with limited public funds.
Investor behaviour
A new study has analysed the behaviour of investors towards initial public offerings (IPOs), focusing on the hydropower development sector in Nepal, and offers valuable insights and implications for investors seeking to align investments with their goals.
The study’s findings suggest Nepalese investors prioritise returns and organisational governance over market risks, as well as revealing significant associations between investor behaviour and sociodemographic variables like age, education, occupation, and primary investment objectives. This, according to study author Dipendra Karki from Tribhuvan University in Nepal, highlights the diverse perspectives influencing investment decisions within the Nepalese context.
There is a critical need for hydropower developers to prioritise investor protection and transparency, fostering trust and confidence in the sector, while regulatory bodies should enhance disclosures, enforce shareholder accountability, and strengthen project oversight to ensure the integrity and stability
of the market.
Future research endeavours, according to Karki, could explore a deeper understanding of the evolving dynamics of investor behaviour in the hydropower sector, considering emerging trends and external factors that may shape investment decisions. In addition, exploring the impact of regulatory interventions and policy changes on investor sentiment could offer valuable insights into creating
a favourable investment environment.
