The African Insurance Agency will support solar PV, hydro, wind, geothermal, biomass and cogeneration technologies
Kampala, Uganda | ISAAC KHISA | The multilateral insurer, African Trade Insurance Agency (ATI), will provide up to US$10million as financial protection to new small and medium-sized renewable energy projects in Uganda to facilitate their smooth operations in times of delayed payments.
ATI Chief Executive Officer, George Otieno, said during the signing of an agreement with the government in Kampala on July 27 that the prospective Independent Power Producers (IPPs) will benefit from this initiative upon payment of 3% of the value of the project as premium.
The new initiative that targets IPPs with up to 50MW, and in exceptional circumstances up to 100MW, will be extended through the Regional Liquidity Support Facility (RLSF).
RLSF is a US$74million joint initiative of ATI and KFW with funding from the German Ministry of Economic Cooperation and Development. It is intended to protect IPPs in the Sub Saharan Africa.
“ATI, as a manager of the facility, will instruct a bank to issue letters of credit to approved Independent Power Producers (IPPs) with the backing of RLSF,” he said.
Otieno said although the letters of credit are traditionally valid for a year, the bank will issue letters of credit with tenors of up to 10 years.
This comes as the GET FiT programme report 2017 reveals that an installed capacity of 158 MW of clean renewable energy shall be added to the national grid from 17 projects in the coming years.
The report noted that six of the 17 projects have been commissioned with significant construction progress registered on the majority of the remaining projects.
Finance Minister, Matia Kasaija, said the new development reflects the government’s commitment to ensuring the viability of small and medium sale renewable energy projects.
“Uganda has a solid history of supporting our public concession, with up to US$500million spent in the last decade on improvements to the grid,” he said.
“With this agreement, we see a RLSF providing a perfect complement to our ongoing strategy of accelerating the delivery of clean energy to the national grid.”
Executives from the energy ministry said the new initiative will help remove liquidity risks and ensures success of IPPs.
Since it was established in 2001, ATI has provided insurance coverage to projects in virtually all sectors including energy projects in Tanzania, Kenya and Zambia, mining and oil projects in the Democratic Republic of Congo, Malawi and Zambia, manufacturing and infrastructure projects in Rwanda, Uganda, and Kenya, and telecommunication projects in Burundi, and Madagascar.
In Uganda, the agency specifically provided coverage to, among others, Kalangala Infrastructure Services, Pearl of Africa Hotel and the ongoing construction of the 600MW Karuma Hydropower Dam. In Rwanda, the agency provided support to RwandAir.
Last month, ATI announced that it will pay its African member governments and other shareholders its first ever dividend this year after recording a 55% growth in net profit to US$9.9million in 2017.
The dividend payment came after the General Assembly of ATI approved it at the Annual General Meeting (AGM) held in Abidjan, Ivory Coast.
ATI has earmarked an initial US$2.5million in payments to its shareholders which include 14 African member governments inclusive of Uganda.
The multilateral insurer recorded gross exposures of US$2.4billion and, in the same period, the company covered investment and trade activities across the continent valued at US$10 billion.
ATI owes its strong results in part to growing demand from investors and African governments for their products as the continent continues to position itself as an attractive destination for investors.
The African multilateral insurer also announced the Indian government’s 5% shareholding worth US$10million that will be represented by Export Credit Guarantee Corporation of India.