The African Development Bank Group and Sweden’s Development Finance Institution, Swedfund International AB (Swedfund), have formalized an agreement to enhance private sector participation in independent power transmission line projects in Africa.
Under the agreement, the Bank Group and Swedfund will collaborate to promote private sector participation in transmission, mainly through public-private partnerships. This will be achieved through project preparation and advisory support to African countries to encourage reforms that boost private sector investment and public-private partnership projects, including stakeholder capacity building.
African Development Bank Group Vice President – Power, Energy, Climate & Green Growth, Dr. Kevin Kariuki, said: “The collaboration between the Bank and Swedfund is one of several transformative partnerships envisaged under the New Deal on Energy for Africa and the Bank’s High 5 strategic priorities, in particular Light Up and Power Africa. The Bank will be able to leverage Swedfund resources to support regional member governments in the development of high-impact public-private transmission line projects, which will increase penetration of renewable energies on the grid and consequently move Africa towards a clean energy transition.”
Swedfund Chief Executive Director, Maria Håkansson, said: “Swedfund looks forward to collaborating with the African Development Bank Group on delivering support for the development of bankable transmission projects. This will be an important step in facilitating private sector participation to increase transmission capacity and lay the foundation for further development of renewable energy in the region.”
The power sector is a key area for infrastructure development in Africa, especially transmission infrastructure, which has historically been a public monopoly, and has not seen comparable investments like those made in privately financed independent power production projects. This has resulted in insufficient and inefficient national and regional transmission infrastructure, poor connection between power supply and demand centers, and a lack of flexibility to integrate high levels of variable and intermittent renewable energy onto the grid.
Transmission infrastructure requires significant investment, which cannot be met by governments alone. The impact of the Covid-19 pandemic and increasing public debt burdens, have led to fiscal constraints and infrastructure financing deficits.
Private sector investment is critical to filling the gap, but requires adequate technical, regulatory, financial systems, and politically enabling environments, as well as equitable risk-sharing arrangements, to address the basic pre-requisites for national and regional transmission projects, such as clarity on land rights and permits, and harmonization of standards, regulations and wheeling tariffs.
The collaboration between the African Development Bank Group, Swedfund, governments and regional power pools, will enable the identification of eligible priority projects and the development of bankable transmission line project pipelines. In addition, different public-private partnership procurement and financing structures, which have been successful in mitigating typical risks in similar contexts globally, will be evaluated and benchmarked.
Swedfund is Sweden’s development finance institution with the mission to contribute to poverty reduction through sustainable investments in developing countries. The Project Accelerator is a facility within Swedfund with the objective to support the development of sustainable projects through sustainable procurement and strengthening of capacity in public institutions. By providing grant support and technical know-how to public institutions for feasibility studies and other project preparatory work, the Project Accelerator contributes to the implementation of Agenda 2030.