The OPEC Fund for International Development (OFID) and partners are expecting that their new loan of $60 million will greatly strengthen the energy security in northwest Tanzania.
The project will include constructing a 166km overhead transmission line connecting the Kagera region to the national grid, replacing the current energy supply from Uganda with local hydropower resources.
According to the statement, “The two new hydropower plants are expected to be operational in 2024 and 2030 with a nominal capacity of 80 MW and 87 MW, respectively.”
The construction of the new transmission line will allow Tanzania to reduce its dependence on energy imports. This diversification will enhance energy security and save costs by eliminating the need to pay for imports in foreign currency.
Furthermore, the expansion of hydropower generation will enable the country to shut down expensive and polluting backup thermal power plants, leading to a cleaner and cheaper energy sector in Tanzania.
According to the statement, “The financing of the project will be shared among several partners, The OPEC Fund with a $30 million loan, as a first tranche of a $60 million facility, will be joined by the Abu Dhabi Fund for Development ($30 million), the Saudi Fund for Development ($12.8 million) and the government of Tanzania with $2.6 million. Other backers are set to finance a downstream distribution network that will connect many unserved communities to the grid.”
Northwest Tanzania’s Kagera region is one of the country’s poorest, with an average income of less than half the national average, according to the National Bureau of Statistics.
With the regional economy dominated by agriculture, the improved power supply will allow other sectors to establish themselves in the region and help to fulfill its potential, as per the statement.
The OPEC Fund signed its first engagement in Tanzania in 1977 and to date has approved more than $400 million for investment in all major sectors of the economy. In particular, recent loans have supported water, road, and infrastructure projects.
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