An inauguration ceremony was held on 10 September to mark the completion of Djibouti’s first wind farm. President Ismail Omar Guelleh attended the ceremony.

The Red Sea Power (RSP) wind farm near Lake Goubet has a capacity of 60MW and is the country’s first independent power project (IPP). 

The developer consortium is made of up the Africa Finance Corporation (AFC) as lead developer, Dutch development bank FMO, Climate Fund Managers, and Great Horn Investment Holding - an investment firm owned by a unit of the Djibouti Ports & Free Zones Authority and Djibouti Sovereign Fund.

Construction of the wind farm began in January 2020. It comprises 17 3.4MW Siemens turbines spread over 387 hectares with a 220MVA substation, and is connected to the grid by a 5km overhead transmission line.

The electricity will be sold under a long-term power purchase agreement (PPA) to Electricité de Djibouti (EDD), the national state-owned utility. 

It is hoped the US$122 million project will provide a template for further investment in the energy sector. The country has enough wind, solar and geothermal resources to triple existing capacity to at least 300MW.

The RSP consortium are already planning the development of a further 45MW of renewable energy capacity. President Guelleh wants Djibouti to generate all its electricity from renewable sources by 2035.

Until now, Djibouti has been reliant on fossil-fuel generated power, as well as electricity imported from neighbouring Ethiopia. Much of its installed capacity comprises mothballed diesel power plants.

Aboubaker Omar Hadi, chairman, GHIH said, “Our aim is to be the first country in Africa to be 100% reliant on green energy by 2035... A reliable and cost-effective energy solution is vital to drive Djibouti's infrastructure growth. With the development of Industrial Free Zones projects, we estimate that the country faces a projected demand of 3,700 MW in the next decade. Tapping into renewable resources like solar, geothermal, wind and tidal is crucial to bridge this gap.”

The RSP project achieved financial close in 22 months.

Samaila Zubairu, president & CEO of the AFC said, “The equity bridge construction finance solution that we deployed has mitigated construction and completion risks, clearly demonstrating AFC’s solutions-focused, de-risking and execution capabilities, as well as introducing a pragmatic way to fast track financial close for projects in Africa.”

The transaction structure substantially reduced the risk associated with the investment. EDD's payment obligations under the PPA were backed by a government guarantee, which in turn was backed by political risk cover provided by the World Bank’s Multilateral Investment Guarantee Agency.

“It is testimony to the power of blended finance,” said Andrew Johnstone, CEO, Climate Fund Managers. “Groundbreaking transactions like this are immensely challenging to fund with traditional project finance as the territory is uncharted and there is no track-record, making it almost impossible for lenders and equity partners to get comfortable with the risk. Blended finance combines both concessional and commercial capital, enabling investors to take a higher share of risk and providing a single source of funding from development to operations. In this case, we believe the project simply would not have been possible without a blended approach.”

The RSP partners also developed a solar-powered desalination plant at the site. It will provide around 40 litres a day of drinking water to 800 residents of two villages near the farm. 

Photo: Wind farm (Source: AFC)

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