Zambia has received a $150 million loan approval from the African Development Bank to help finance the development of a 300MW coal-fired power plant project as well as revamp the Maamba coal mine in Maamba, which Maamba Collieries Limited is developing in the country.

Zambia, like many other African countries experiencing unreliable electricity due to lack of supply, is heavily dependent on hydropower energy, which accounts for 96 percent of its total energy production. Hydropower energy production, however, is drought-sensitive, exposing the country to severe economic risks in case of drought.

The Maamba power plant project is expected to cost $800 million and will increase the supply and reliability of electricity in Zambia. It also will address some of the severe environmental concerns at the coal mine caused by the unregulated and spontaneous self-combustion of tons of currently unused low-grade coal while producing much-needed electricity for the country and the region.

By diversifying away from hydropower and capitalizing on readily available low-grade coal resources, the project will serve as a good example of mitigation and adaptation to climatic changes in the region.

“After the approval of the Ithezi Thezi hydropower project in 2012, I am delighted to reaffirm the African Development Bank’s commitment to support Zambia’s power sector as it embarks onto the path of energy source diversification and resilience in an increasingly climate change-sensitive environment,” said Tas Anvaripour, AfDB’s division manager for infrastructure finance. “By capitalizing on readily available low-grade coal resources that are otherwise left to self-combust in the open air and inflict an environmental burden on the entire Maamba area, the project will produce much-needed power for households, businesses, and government, while remediating a long-standing environmental concern.”

The Maamba power plant will use well-proven and advanced technology featuring high-combustion efficiency and reduced GHG emissions for a lower overall environmental footprint.

Worldwide, clean energy has enjoyed a big boost from investors in recent years. Investments worldwide have increased three-fold from 2007 to 2012 from $36.8 billion to $108.9 billion.

Africa is no exception. AfDB, through its technical support and programs has helped to accelerate green energy growth on the continent.

Between 2011 and 2012, AfDB’s investment in clean energy in Africa increased exponentially by 92 percent to $1.475 billion in 2012 from $769 million in 2011, according to a new report by Bloomberg New Energy Finance, which looks at the clean energy transactions of 26 national and multilateral development banks from 2007 to 2012 .

Kurt Lonsway, acting director of the African Development Bank’s Climate Change department, said “in a few short years, the AfDB has become a major player in the global effort to develop clean energy. The need is particularly real in this region. Africa as a continent is in a distant fourth place behind Europe, Asia and Central and South America in terms of the total amount of clean energy investment. Thus it is crucial that the AfDB stay active in this area to keep the continent moving towards an environmentally sustainable future.”

According to the report, AfDB is the largest source of financing for the Africa region, providing $4.3 billion of the total $14.7 billion invested by development banks in the region for clean energy projects since 2007. The World Bank Group takes second place with $2.9 billion.

Since it created its Energy, Environment and Climate Change Department in May 2010, the bank has been keeping pace with investment trend, specifically, the department manages climate finance instruments for the Climate Investment Funds (CIF), the Global Environment Facility (GEF) and the Sustainable Energy Fund for Africa (SEFA), but also in general in terms of its work on the environment so it can deliver tangible results for the bank’s regional member countries. In 2012, its clean energy financing from development banks broke the $100 billion for the first time in history.

The $1.2 billion additional resources brought by these funds allows the bank to support innovative operations such as the Moroccan Integrated Solar and Wind Energy Programs or the Geothermal Development Project in Kenya, which would otherwise be too costly and risky to materialize in the short term. In addition to financing, the bank provides technical support for accelerating green growth.

Maamba Collieries Limited, a company incorporated in Zambia in 1971 and privatized in 2010 through a joint venture between Nava Bharat Singapore Pte Limited (NBS) and Zambia Consolidated Copper Mines (ZCCM), a public investments holding company.

AfDB is the lead fund arranger alongside Absa Capital, a commercial bank from South Africa.

In addition to AfDB’s lead role in organizing capital from public and private financial institutions and commercial financiers, other financial institutions have set up financial programs in the country.

The International Finance Corp. is also collaborating with the World Bank to help address key development challenges in Zambia such as improving the investment climate; diversifying the economy by promoting industries such as agribusiness, expanding access to financial services for small and medium enterprises and promoting dialogue between the government and the private sector, particularly in infrastructure and health.

So far, IFC has invested $62 million in Zambia as of the end of June.

Last month it issued the first Zambezi bond through which it successfully raised 150 million kwacha to support private sector development lending program for the country. It was the first local-currency bond issued by a non-resident in Zambia.

“The IFC Zambezi bond is a landmark transaction for IFC and for Zambia,” said Jingdong Hua IFC Vice President and Treasurer. “It sends a strong signal that Zambia’s domestic capital markets are open for business—and the strong response from domestic and international investors confirms that Zambia is an attractive opportunity.
As the first bond issued under the IFC Pan-African bond program we hope that it will also promote greater focus on capital market development in the region.”

The IFC Zambezi bond is the first bond issued under the IFC Pan-African Domestic Medium-Term Note Program, launched in May 2012 to facilitate regular bond issuances by IFC in the region. Under the program IFC can issue bonds of up to 2.5 billion Zambian kwachas (approximately $460 million). The program currently includes Botswana, Ghana, Kenya, Namibia, Nigeria, Rwanda, South Africa, Uganda and Zambia.

“Through our support to private sector investment in Zambia, we can help ensure that the opportunities that exist today create even greater opportunities for the long-term,” said Sylvain Kakou, IFC Senior Investment Officer and representative in Zambia. “Deepening access to local-currency finance and expanding financing alternatives are essential to support a thriving private sector and a priority for IFC in Zambia.”

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