In the early months of 2020, local Solomon Islanders were being hired as laborers, engineers, carpenters, and security personnel for one of the Pacific Island nation’s biggest projects—the Tina River Hydropower Development Project. Despite the impact of COVID-19, Solomon Islands Prime Minister Manasseh Sogavare says the project is on track to deliver “extraordinary benefits” to Solomon Islanders.
Solomon Islands, scattered over 1.3 million square kilometers of ocean, relies almost entirely on imported, polluting diesel for its energy needs. The project, sponsored by Korea Water Resources Corporation (K-water) and Hyundai Engineering Corporation (HEC), will be the first large-scale infrastructure project to be developed under a public-private partnership and the country’s first scaled renewable energy project.
Once up and running, the project will curb Solomon Islands’ reliance on expensive diesel power by almost 70 percent and lower prices for homes and businesses. In addition to creating more jobs and lowering power prices, the project will pave the way for the country to reduce its greenhouse gas emissions by two and a half times its 2025 target. It will also ensure a steady price for power, unaffected by global economic swings.
This will especially help people like Toata Molea, who has struggled to afford the electricity he needs to run his service station, reliant on imported diesel fuel—paying among the highest costs in the world. Molea says the cost of electricity is his biggest overhead. In just one month, he can spend more than what most people on the islands earn in a year.
The landmark financing deal for the project, worth over $200 million — through loans and grants from six institutions—was signed in December 2019. The World Bank Group has supported the project for more than ten years, starting with the World Bank’s project preparation, which included initial feasibility studies and environmental and social impact assessments. The World Bank also committed funding from IDA that helped to mobilize funding and coordinated the lenders’ group.
IFC’s support has been the cornerstone, as transaction adviser to the government of Solomon Islands, for project preparation, investor selection, the negotiation of project agreements with the preferred bidder, and the final financing agreement package. In March 2020, MIGA provided equity political risk insurance coverage to the private investors.
The size and complexity of the proposed project in a fragile and post-conflict nation has fostered collaboration among multiple development partners and mobilized concessional finance from other multilateral and bilateral institutions, including the Green Climate Fund, the Republic of Korea’s Economic Development Cooperation Fund, the Abu Dhabi Fund for Development, the Asian Development Bank, and the Australian government.
The cheaper renewable energy delivered through the project will ensure that Solomon Power, the country’s state-owned electricity supplier, can deliver cheaper power, including outside Honiara.
IFC’s project preparation support has been funded by the Pacific Partnership, supported by Australia and New Zealand. Other support came from the Global Infrastructure Facility as well as from DevCo, a multi-donor facility affiliated with the Private Infrastructure Development Group, with funding from the Netherlands and Sweden.