The African Development Bank and the United Kingdom have announced the selection of the Transmission Network Improvement Project in Kenya as a beneficiary project under the Room to Run Sovereign transaction (R2RS). This means that up to $59 million of the $116 million total project cost corresponding to the climate mitigation component of the loan, was made possible through the additional capital unlocked by the UK Government guarantee.
Approved in 2023, this project complements the ongoing UK Government efforts to address transmission network capacity limitations, reliability and quality of electricity supply, and high-power system losses, technical and non-technical, in Kenya. The project will extend and reinforce the national electricity grid system, and the Last Mile Connectivity Program of the Bank. Addressing the transmission system gaps in the country is a prerequisite for achieving universal electricity access and improving the quality of life of communities through enhanced socioeconomic development.
Announced at COP26 in November 2021, R2RS is an innovative and highly scalable balance sheet optimization transaction that is helping the Bank lend more funding for critical climate change projects. Under R2RS, a $2 billion guarantee is provided to the Bank by the UK Government ($1.6 billion in cover) and City of London insurers ($400 million). By assuming a portion of the credit exposure on a part of the Bank's sovereign portfolio, R2RS enables the Bank to provide up to an additional $2 billion of climate finance to Africa by 2027, split between adaptation and mitigation.
In May last year, the UK and the Bank announced the first two projects that were enabled by R2RS - an €80 million Egyptian wastewater project and a €37 million water sanitation project in Senegal. Both focus on water supply and sanitation and will benefit millions in their respective countries. This project in Kenya is one of five projects to benefit from the unlocked lending capacity provided by R2RS since the agreement was signed in 2022. This announcement accompanies three other beneficiary projects in Tunisia, Benin and Mauritius, bringing the total finance unlocked by the R2RS to over $400 million.
African Development Bank Vice-President for Power, Energy, Climate and Green Growth, Kevin Kariuki said, "This transaction is one of several projects constituting its lending programme through which the African Development Bank fulfils the call by stakeholders at COP27 for MDBs to innovate and scale up climate finance through the Multilateral Development Banks. The African Development Bank is proud to partner with the UK in this initiative and to be at the forefront of such developments."
Neil Wigan OBE, High Commissioner to Kenya said: "Powering economies requires power for people. We're working together with the AfDB and Kenya to deliver what Kenyans want and need: reliable power for reliable economic growth - all with green energy that protects the prospects of future generations. The UK and Kenya are going far and going together."
Nnenna Nwabufo, African Development Bank Director General for East Africa added: "Kenya is close to achieving universal electricity access with a high component of renewable energy. This represents a major milestone in both sustainable development and the fight against climate change."
