Africa Growing Together Fund provides $20 million loan for 44.8MW Malagarasi Hydropower Project (Linked to Project ID#36104)

On May 22, 2014, the African Development Bank (AfDB) and the People's Bank of China (PBOC) signed an agreement for 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 administered by AfDB. Then, on May 26, 2021, AGTF signed a $20 million loan agreement with the Government of Tanzania for the 44.8MW Malagarasi Hydropower Project. On the same day, the African Development Bank’s Africa Development Fund (ADF) issued a $120 million loan to the Government of Tanzania for the same project. The borrowing terms of the AGTF loan and the ADB loan were as follows: a 24-year maturity, a 5-year grace period, an interest rate of 6-month LIBOR plus a 0.9% margin, a 0.25% commitment fee, and a 0.25% management fee. The project involves the construction of a 44.8MW hydropower plant in Western Tanzania that will provide reliable renewable energy to households, schools, clinics, and small and medium-sized enterprises in the Kigoma Region. The power plant will be located on the Malagarasi River, west of the Malagarasi swamps, in the area called Igamba. The project site (exact locational coordinates: -5.178611, 30.063611) will be located at Igamba Falls. This location lies approximately 100 kilometers (62 mi), by road, southeast of the regional capital of Kigoma. The project has four components. Component A (construction of Malagarasi hydropower plant) consists of (i) civil works comprising earth and concrete works including powerhouse, gravity dam, diversion works, and switchyard as well as access roads/bridges and permanent camps together with offices and staff accommodation, dispensary & primary school facilities; (ii) electro-mechanical works comprising supply, installation, testing, and commissioning of turbines, synchronous generators, step-up transformers, associated sending-ends switchgear and balance of plant including hydraulic steel structures; and (iii) tree planting as part of the livelihood restoration and community development as well as climate change mitigation measures. Component B (construction of an evacuation transmission line) involves the supply, installation, testing, and commissioning of a 54 km single-circuit 132 kV transmission line from Malagarasi 10.5/132 kV power plant station to interface with the national grid at the proposed EDCF-funded Kidahwe 400/132/33 kV substation. Component C (construction of distribution networks and rural electrification lines including installation of last-mile connections) involves 33 kV medium voltage (MV) grid extensions of 40 km, low voltage (LV) reticulations of 65 km, installation of 15 new distribution transformers to serve, among others, communities living within the neighborhood of the power plant and transmission line route environs as well as increasing the 33 kV energy dispatch capacity from Kidahwe 400/132/33 kV substation. This will also include the supply of no-pole 4,250 customer connection materials (to clear TANESCO’s application backlogs in Kigoma, Kibondo, and Kasulu load centers) as well as 1,000 ready-boards for low-income households. These connections will be inclusive of at-least 4 dispensaries (with antenatal or maternal facilities) and 6 primary schools under the livelihood restoration program in Uvinza District. Component D (project management and contract) involves (i) consultancy services for project management and supervision of works for Malagarasi HPP, distribution network expansion & rural electrification including installation of last-mile connections; (ii) institutional support for sustainable management and development of hydropower resources; and (iii) annual Project audits comprising financial & technical, procurement and environmental & social compliance. Component E (compensation and/or resettlement) involves compensation and/or resettlement of project-affected persons (PAPs). Upon completion, it is expected that the hydropower plant will generate an average annual output of 181 GWh and meet the electricity needs of as many as 133,649 Kigoma households, bringing the region’s electrification rate more closely in line with the rest of the country.

Additional details

1. The AfDB project identification number is P-TZ-FAB-004. 2. The project’s economic rate of return is estimated at 17.56%. 3. The all-in interest rate (1.086%) was calculated by adding an 0.9% margin to the average 6-month LIBOR rate in May 2021 (0.186%). 4. The margin of 0.9% is calculated by adding the Funding Cost Margin (unknown) to the Lending Margin (0.8%) and the Maturity Premium (0.10%)

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