World Bank Group Boosts Private Funding Prospects for Banda Gas-to-Power Project in West Africa
May 29, 2014
Project will expand electricity supply and trade in Mauritania, Mali, and Senegal
WASHINGTON, May 29, 2014 - The World Bank Group Boards of Executive Directors today approved up to $261 million in guarantees issued by IDA*, its concessional financing arm to Mauritania ($130 million), Senegal ($99 million) and Mali ($32 million) to support the Banda gas-to-power project. The support also includes $585 million in investment guarantees provided by the Multilateral Investment Guarantee Agency (MIGA).
The Banda Gas-to-Power Project will produce and convert natural gas from offshore gas fields in Mauritania into 300 megawatts of new electricity. This will provide affordable, reliable, and sustainable power to Mauritania’s national grid for its homes, businesses, and mines. It will also export power to Mali and Senegal.
“African countries cannot create jobs and opportunities for young people without adequate access to affordable, reliable and clean energy,” says Makhtar Diop, World Bank Vice President for the Africa Region. “This first-of-its-kind combination of guarantees mobilizes $950 million of private investment in gas extraction and energy generation by facilitating power trade among Mauritania, Senegal, and Mali.”
Lack of electricity cuts growth rates by as much as 2% in Senegal. Demand for power is rising in all three countries. Current power demand is being increasingly met through expensive and polluting liquid fuel based power generation. High costs of generation make it difficult to achieve full cost recovery for the power supplied. Utilities are struggling and require public money to stabilize their finances.
“The Banda project shows that regional approaches can help address the energy deficit in Africa," says Michel Wormser, MIGA’s Vice President. He added, “The combination of World Bank and MIGA guarantees was key to mobilizing private investments for the project.”
Using natural gas for domestic power generation and exports is part of the Government of Mauritania’s strategy to maximize development impact of resource extraction. Over 1.4 million households or 7 million people stand to benefit in the three countries. New gas finds in Mauritania are a potential game changer for the sub-region.
The Banda gas-to-power project presents a new approach to developing energy resources on a regional basis. Combining power demands from multiple countries provides the scale at which gas field development becomes commercially viable at acceptable cost for power consumers. The project also uses the creditworthy mining sector as an anchor customer to create economies of scale and reduce buyer risks.