The African Development Bank (AfDB) has agreed to support Madagascar’s Sahofika hydro-power project with partial risk guarantee (PRG) of $100m.

Located on the Onive River, 100km south-east of the capital Antananarivo, the 205MW Sahofika hydropower project is expected to generate 1,570GWh of clean energy annually.

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This addition of renewable energy capacity to the national grid will benefit more than two million people in the region. The PRG provided by the bank will support the payment requirements of the state-owned off-taker JIRAMA.

AfDB Power, Energy, Climate Change and Green Growth acting vice-president Wale Shonibare said: “The bank’s support to the national utility, JIRAMA, through the PRG provides much-needed credit enhancement as JIRAMA continues to build its track-record as a bankable electricity off-taker that will in-turn mobilise investments into Madagascar’s energy sector.

“This will enable the country to achieve its strategic goals in terms of increased energy access, a more diversified energy mix and least cost generation.”

Construction of the hydroelectric power plant involves building a 110km transmission line to the site, 112km of access roads and camp facilities.

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Upon completion, the hydro-power project is expected displace up to 90% of the country’s thermal energy generation capacity. Furthermore, it will help expand Madagascar’s energy mix with more renewable energy sources. It will also help in reducing greenhouse gas emissions.

AfDB Energy Financial Solutions, Policy and Regulation acting director Aida Ngom said: “The project, which supports Madagascar’s ongoing reforms in the energy sector, is expected to reduce the share of thermal power generation in the country’s energy mix and significantly reduce electricity tariffs.

“The displacement of thermal power generation will also enable JIRAMA to considerably reduce its fuel purchase and decrease subsidies from the government to sustain its operations.”