Tembo Power evaluating investor bids for run-of-river hydropower plants in Burundi
Tembo Power is currently in the process of choosing investors for two run-of-river power plants which will have a combined capacity of 22 megawatts, and will be located in southwest Burundi.
A total investment of US$65 million will be required for the two hydropower plant projects. The projects have an estimated completion time of 24 to 26 months.
Run-of-river hydroelectric plants are hydroelectric systems that harvest energy from flowing water to generate electricity in the absence of a large dam and reservoir.
Tembo Power is an Independent Power Producer (IPP) currently developing power generation projects across sub-Saharan Africa, with a strong focus on small to medium-sized run of river hydropower plants. The company aims to provide reliable and affordable electricity to remote areas of the sub-Saharan Africa region.
Expressions of Interest were invited in March (2022), and had a deadline of 31st March (2022). The selected pre-qualified investors will sign a non-disclosure agreement following which they will be provided with an information package and access to a data room. The investors will then be required to provide a non-binding offer by 15th May (2022). Sponsor selection will be made by 30th May (2022). Binding partnership agreements with the selected investor will be concluded by 31st August (2022).
One of the proposed hydropower plants will have a power generation capacity of 12.4 megawatts, and will be located in the village of Sigu. The Sigu hydropower plant will harness the water energy of the Siguvyaye River in Bururi Province, southern Burundi.
The second proposed hydropower plant will have a power generation capacity of 9.6 megawatts, and will be constructed on the Dama River in Rumonge in the southwest of Burundi. The Dama hydropower plant will also have a small storage capacity to enable the dam absorb higher water flow in the shoulder seasons (spring and autumn) following cloud bursts or afternoon rain and regulate the release for hydropower production.
The projects are in the final development stage. The IPP and project developer will expect the investors to construct the projects under a project finance model in which Tembo Power and its local partner will retain a 45% to 55% stake in the projects, the EPC contractor will have up to a 10% stake while new investors will have a 35% to 45% stake. Terms of the partnership will include a combination of reimbursement of the development expenses incurred so far, commitment to additional development capital to reach financial closing, and a premium for accessing the proposed stake. Financial close for both projects is expected in the second quarter of 2023.
Raphael Khalifa, the Chief Executive Officer at Tembo Power, emphasized the minimal negative environmental and social effects arising from the construction of these medium and high head run-of-river projects. The two proposed hydropower plants will be capable of producing 105 gigawatt-hours of energy per year upon completion.
The feasibility studies, including geotechnical and geophysical surveys for the two plants, were conducted by Zutari (previously Aurecon, a consulting engineering firm based in Pretoria, South Africa), a technical partner of Tembo Power. Trinity LLP is the legal advisor to Tembo Power, providing advice on financing the projects according to international project financing standards.
The local environment in Burundi is becoming increasingly favourable to IPP investments. The increasingly favourable investment climate will help facilitate project funding and construction. The government of Burundi is promoting the construction of energy projects which will enhance installed capacity and eliminate load shedding in the country. This new strategy was reinforced in April 2021, when Burundi’s Council of Ministers approved the implementation of projects to construct two hydroelectric power plants on the Mulembwe and Ruvyironza rivers.
Tembo Power will sell the output energy to Burundi’s Régie de production et distribution d’eau et d’électricité (REGIDESO). REGIDESO is a public sector company in Burundi charged with the production and distribution of water and electricity to residential, commercial and industrial customers.
Top Photo: A small hydro-electric dam (Richair | Dreamstime)