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AfDB, EU, And France Invest $300m in Tanzania’s Hydropower Project

The project is expected to have a major impact on the economic development of this rapidly growing zone, which lies at the heart of the Great Lakes region.

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Dar es Salaam. The government of Tanzania, the African Development Bank (AfDB), and the French Development Agency (AFD) have signed agreements for two development project loans worth $300 million. 

In a statement released on April 14, 2023, AfDB said that the funds will finance the construction of the 87.8-megawatt Kakono Hydropower Plant located in the Kagera region in the northern part of Tanzania. 

The project also received a grant of EURO 36 million from the European Union (EU). According to the statement, the signing ceremony occurred on March 15, 2023, in Dar es Salaam.

Tanzania depends on hydropower and thermal power plants—mainly gas-fired—for its electricity supply.

However, AfDB stated that the East African nation has considerable untapped renewable energy potential to meet its rapid growth while taking a low-carbon path.

A coalition of development partners is financing the Kakono Hydropower Project, intended to increase renewable generation capacity and reduce hydrological risk via a dam located on a new watershed less affected by droughts. 

READ MORE: Govt, EU Institutions Sign MoUs Worth Sh850b At Tanzania-EU Business Forum

The Kakono Hydropower Plant results from close collaboration between the African Development Bank, Agence Francaise de Developpement, and the European Union.  

These institutions are co-financing this project with a $ 161.47 million African Development Bank soft loan, a EURO 110 million soft loan from French Development Agency, and EURO 36 million grant from the European Union.

The Kakono Hydropower Project, implemented by the Electric Supply Company (TANESCO), will reduce greenhouse gas emissions by 216,065 metric tons per year and comply with the best international environmental and social standards.

The project will serve four million people and increase the service coverage rate by around seven per cent of the population. 

READ MORE: TANESCO Blames Ongoing Power Rationing on Climate Change

It is expected to have a major impact on the economic development of this rapidly growing zone, which lies at the heart of the Great Lakes region. 

The project is expected to boost industrialisation, spur economic growth in Tanzania and the neighbouring countries, and strengthen Tanzania’s leading position within the East African Community.

Alongside the construction of the new hydropower plant, associated infrastructure will be built, including upgrading the existing Kyaka substation and a new 39-kilometre 220-kilovolt transmission line and capacity building support for TANESCO.

Speaking during the signing ceremony, African Development Bank Country Manager for Tanzania Patricia Laverley observed that when completed, the Kakono Hydropower Plant would serve approximately four million people, small-medium enterprises, and mining companies in the northwestern part of the country.

“The construction of the new power plant will help improve TANESCO’s financial sustainability arising from decommissioning the diesel-based power plants in the Kagera Region,” she said, adding: “The economic benefits derived from the supply of affordable power will be immense.” 

“We can expect to see a marked improvement in the quality of life for people in the Kagera region and Tanzania more broadly,” Ms Laverly observed. “These tremendous gains will contribute to building a more competitive economy in Tanzania under the leadership of President Samia Suluhu Hassan.”

French Ambassador to Tanzania Nabil Hajlaoui said: “We have heard President Samia Suluhu’s message. She aims to generate five gigawatts of electricity by 2025. France is ready to be part of this journey by investing in power generation and transmission projects to meet the rapidly growing electricity demand while reducing the carbon intensity of its energy mix.”

 AFD Country Director Celine Robert said that the agency was delighted with the signing of this project, which is entirely in line with international climate objectives and AFD’s firm commitments in that regard. 

“This investment will have a major impact on economic development and population well-being as the infrastructure will answer the power needs of 3 to 4 million people,” Ms Robert said. “This signing represents an important milestone and confirms that the cooperation between Government and AFD is deepening.”

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