Prospects for the completion of the Ethiopia-Djibouti power interconnection became a reality on Wednesday in Tunis, where the Board of Directors of the African Development Fund, the concessionary window of the AfDB Group, approved a combined loan and grant of 20.92 million Units of Account*, equivalent to US$ 32.57 million, to fund the Project.
Under the approvals, Ethiopia will receive UA 5.20 million (US$ 8.3) while Djibouti gets UA 15.72 (US$ 24.48 million) to finance the project, which aims at improving electricity access at affordable prices in the two countries. It is also expected to improve the environment for job creation and poverty reduction through the provision of modern, affordable energy services.
Ethiopia and Djibouti, in 2002 signed an agreement to implement the power interconnection project in order to develop available energy resources for their mutual benefit. The Bank Group in 2004 approved a combined US$ 56 million from its multilateral window to finance the project.
The major components of the current completion project comprise the development of a power transmission network (construction of transmission lines and substations); the electrification of border towns; project supervision and management as well as institutional support to the Djibouti Electricity Company (EdD) and the Ethiopian Electric Power Corporation (EEPCO).
Considered to be the first of its kind in the Horn of Africa, the project is expected to improve the power trade within the region. When completed, it will be a component of the Eastern Africa Power Pool that is currently under development.
The project's economic internal rate of return is estimated at 29% based on the revenues generated by exports and the electrification of border towns, the establishment of new business enterprises induced by the availability of electricity in the area, cost savings from imported power and increased consumption as result of reduced price of electricity power tariff in Djibouti.
The total cost of the project is estimated at UA 73.79 million. The ADF will finance 95.26% of the foreign exchange cost (UA 57.89 million) and 11.60% of local cost (i.e. UA 1.51 million) of the project. The Ethiopian Electric Power Corporation EEPCO will finance 4.74% of the foreign cost (UA 2.88 million) and 73.35% of local costs (9.55 million). The Djibouti Electricity Company will finance 15.05% of the local costs of the project (UA 1.96 million).
*1 UA (Units of Account) = US$ 1.55722 = ETB 15.6104 = DJF 278.999 as at 08/10/2008
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