An Energy Plant in Sierra Leone Helps Restore Power to its People
The new power plant is expected to stimulate economic growth and job creation in Sierra Leone. © Dominic Chavez/WB
In 2014, West Africa experienced the largest outbreak of Ebola in history, and the people of Sierra Leone in particular felt the widespread, devastating effects of the virus. The public health crisis worsened an already dire economic situation in the country—one of the world's poorest, where only 15 percent of citizens have access to electricity.
Unreliable electricity services hindered job creation and economic diversification long before the Ebola epidemic, as the power sector was already experiencing decades of underinvestment. A non-creditworthy national power utility company trapped the country’s power sector in a vicious cycle that kept residents in the dark. The closure of two large mines in the past few years stressed the economy even further.
The combination of catastrophes requires a complex, collaborative solution to lift the economy of Sierra Leone and spur private investment. IFC, the World Bank, the Multilateral Investment Guarantee Agency (MIGA), and other development institutions are cooperating to create a path forward. Ultimately, the successful implementation of the project will rely on sustained commitment to broader reforms aimed at revitalizing the power sector.
IFC began by committing $27 million in senior debt, and secured an additional $82 million in financing from other development institutions for the Western Area Power Generation Project, which includes the development, construction, and operation of a 57-megawatt heavy oil fuel-fired power plant near Sierra Leone’s capital, Freetown.
The Western Area Power Generation Project will increase Sierra Leone’s power generation capacity by more than 50 percent when it reaches full capacity—helping stimulate economic growth and job creation. Electricity generated by the facility will be sold to the national energy company, EDSA, under a 20-year power purchase agreement. As the first independent power producer in the country, the venture is also expected to trigger additional private sector participation in the domestic power sector.
Energy Powers Growth
In a nation with so many needs, energy is the seed for broad-based development, and this understanding impels IFC’s priorities in Sierra Leone. In addition to an enhanced healthcare system to prevent Ebola’s re-emergence, national recovery will depend heavily on attracting private investment, broadening of the economy to support job creation, and effective implementation of the recovery plans.
That’s where close coordination among World Bank Group institutions makes a significant impact. In addition to IFC’s investments, the International Development Association (IDA) is planning to provide a partial risk guarantee of up to $40 million for the Western Area Power Generation Project—alongside a $56 million package to rehabilitate and upgrade the national distribution network. MIGA aims to provide a political risk guarantee of up to $60 million to cover equity, shareholder loans, and retained earnings.
Other investors in the project include the African Development Bank; the United Kingdom’s development finance institution, CDC; Emerging Africa Infrastructure Fund; and the Dutch development bank, FMO.
Because of the enormous scale of the country’s power generation capacity needs and acute shortages tied to fluctuations in hydropower, our research found that heavy fuel oil offers the best low-cost option to provide a stable, reliable source of baseload power, laying the foundation for other renewable energy sources to be integrated into the distribution network. Sierra Leone does not currently have access to natural gas, but once that cleaner-burning fuel becomes available, the power plant can be converted to run on gas.
By reviving the economy and improving citizens’ quality of life, the Western Area Power Generation Project offers an opportunity for Sierra Leone to pull itself out of a dark period, lighting the way for national progress.
To learn more about IFC’s work in infrastructure, visit www.ifc.org/infrastructure.
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Published in November 2016
