Africa Growing Together Fund provides $50 million loan for Energy Sector Efficiency and Expansion Programme Phase I (ESEEP I) (Linked to Umbrella Project ID#36104)

On May 22, 2014, the African Development Bank (AfDB) and the People's Bank of China (PBOC) signed an agreement for the Africa Growing Together Fund (AGTF) (see Umbrella Project ID#36104). The purpose of this $2 billion loan facility was to finance large development projects in Africa between 2014 and 2024. The AGTF is sponsored by the PBOC and the administered by AfDB. Then, on March 20, 2020, AGTF signed an $50 million loan agreement (ID#5050200001054) with the Government of Angola for the Energy Sector Efficiency and Expansion Programme Phase I (ESEEP I). On the same day, the African Development Bank’s African Development Fund issued an $480 million loan agreement (ID#2000200004671) to the Government of Angola for ESEEP I. The borrowing terms of the AGTF loan were as follows: a 25-year maturity, a 8-year grace period, an interest rate of 6-month LIBOR plus a 1% margin, a 0.25% commitment fee, and a 0.25% upfront (management) fee. As of February 2022, the AGTF loan had achieved a 0.25% disbursement rate ($125,000.00 out of $50 million). The Energy Sector Efficiency and Expansion Programme Phase 1 (ESEEP I), which aims at strengthening Angola’s power transmission and distribution system, is structured around three components: (i) construction of a 343 km, 400kV Central-South transmission line that runs from the Belém do Huambo Substation to the Lubango Substation (which is expected to carry 2,250 MW from the north to the south of the country in order to supply a local grid that is currently dependent on diesel-powered generators); (ii) revenue improvement through installation of prepaid meters; and (iii) program management for project design and implementation. The program will reinforce the operational capacity of the Angolan power distribution utility (ENDE) while increasing the wheeling capacity of the transmission system countrywide. The beneficiaries are the households, industries, businesses, small and medium sized enterprises in Angola, who will gain access to cheaper, more reliable and sustainable electricity from more than 1,000 MW excess power from the Northern part of the country. The Southern provinces, the most affected by the war, are run as isolated systems, supplied through costly diesel generated power while low-cost hydro excess capacity is available from the Northern power system. ESEEP I intends to address this anomaly. In addition, the country would benefit from the opportunity to replace existing expensive thermal plants, thereby lowering their cost of power generation. Furthermore, the distribution utility ENDE would improve its financial sustainability by reducing nontechnical losses and reducing its dependence on state-subsidies on fuel costing $11 million monthly.

Additional details

1. The AfDB project identification number is P-AO-FA0-003. 2. The project’s economic rate of return is estimated at 23%. 3. The all-in interest rate (1.964%) was calculated by adding an 1% margin to the average 6-month LIBOR rate in March 2020 (0.964%). 4. The margin of 1% is calculated by adding the Funding Cost Margin (unknown) to the Lending Margin (0.8%) and the Maturity Premium (~0.2%). 5. This project is also known as the 343 km North & South Grids Transmission Line Project.

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