Cameroon: Nachtigal takes major step forwards

09 Nov 2018

The 420MW Nachtigal hydroelectric power project in Cameroon took a significant step forwards on 8 November as Proparco and Agence Française de Développement (AFD) signed a loan agreement worth €150m for the project. €90m is being provided by AFD with €60m from Proparco. Proparco also led financing on behalf of Germany’s DEG, which is providing €35m, and the Netherlands’ FMO, which is providing €30m.

On the same day, French utility EDF signed final and binding agreements with the International Finance Corporation (IFC), part of the World Bank Group, for the construction of the plant. EDF is also a 40% shareholder in Nachtigal, alongside IFC (30%) and the Cameroonian government (30%). Construction is expected to begin before the end of the year, with commissioning in 2023.

EDF was involved in the 1,070MW Nam Theun II hydroelectric project in Laos, which the World Bank has considered the template for how to do large hydroelectric projects in developing countries with minimal social and economic impact since it came online in 2010. In a statement, EDF said it “will be harnessing its experience from the Nam Theun II dam project in Laos where [EDF] provided socioeconomic support, recently recognised by independent experts.”

EDF chairman and chief executive Jean-Bernard Lévy said, “the Nachtigal project is a contributor to two key objectives of our Cap 2030 strategy: tripling our share of business outside of Europe and doubling our renewable capacities worldwide by 2030.”

Three days later on 12 November, the Emerging Africa Infrastructure Fund (EAIF), part of the Private Infrastructure Development Group, announced that it was lending €50m to Nachtigal. The loan has a tenor of 18 years.

EAIF executive director Emilio Cattaneo said, “This was a large and complex financing of a strategically important electricity generating infrastructure asset. Concluding the debt finance is a significant moment and marks many months of cooperation by the public and private sectors. As one of the most experienced providers of debt finance to renewable energy projects in Africa, EAIF was able to move quickly to evaluate the project and meet a potential shortfall in debt funding.”

Power demand in Cameroon is growing at an estimated 7%/yr and generation has failed to keep up, resulting in frequent blackouts. Nachtigal would represent an increase of around 30% on current generation capacity in Cameroon. The project is located near Nachtigal Falls, 65km north-east of the capital Yaoundé.

A 1,455-metre-long and 13.6-metre-high concrete dam will be built as part of the project, creating a reservoir covering an area of around 4km2. A 3.3km long and 14-metre-deep headrace channel will carry water to the power house, which will use seven 60MW turbines. It will benefit from the Mbakaou and Lom Pangar dams upstream, which help to regulate the river flow. A 50km transmission line to the Nyom II substation will also be built, which is expected to generate around 2.9TWh/yr.

Power will be sold to the Southern Interconnected Grid through a 35-year availability-based power purchase agreement with Eneo, a utility owned by the government and United Kingdom-based private equity group Actis LLP.  

A quarter of the €1.26bn cost is being funded through equity, with the remainder financed by a group of eleven development finance institutions (DFIs) and four local commercial banks, led by IFC. Local banks are covering 15% of the cost, underwritten by World Bank guarantees, with 61% provided by the DFIs. It will be the biggest project financed hydropower plant ever to have been built in Africa.

The lending syndicate includes the African Development Bank, Africa Finance Corporation, AFD, Attijariwafa SCB Cameroon, Banque Internationale du Cameroun Pour l’Epargne et le Credit, CDC Group, DEG, the EAIF, European Investment Bank, FMO, IFC, the Opic Fund for International Development, Proparco, Société Générale Cameroun, and Standard Chartered Bank Cameroon. Legal advisors to the lenders were Clifford Chance and Jing & Partners, with JLT Speciality Ltd advising on insurance. EY was the model and tax auditor and Mott MacDonald was the technical advisor.

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