DR Congo seeks $340m for solar hybrid plant

From the newsletter

Moyi Power, a consortium led by Gridworks, has begun the financing process for the $340m solar metrogrid project in DR Congo. It aims to raise debt and grants. The African Development Bank has been appointed as the lead arranger for debt financing and concessional funds. Once the project is completed, it will power a million people.

• The financing process is expected to take at least 12-15 months. Construction will take 18 months and will provide power under a 20-year concession.

• Approximately 80% of the $160 million first-phase financing has been identified, with Moyi Power now seeking the remaining debt and viability gap funding. This is to guarantee its commercial viability and ensure it attracts private sector finance.

More details

• The project will initially deploy 18 MW of photovoltaic panels, 40 MWh of battery storage, and 8 MW of diesel generation in the three cities of Bumba, Gemena, and Isiro, which are not connected to the grid. The project is expected to connect around 37,000 households and commercial customers in its initial five years, with the goal of doubling operating capacity every five years.

• The model builds a network of interconnected mini-grids, providing more potential than traditional isolated mini-grids. The company says that the model can be replicated in up to a hundred cities in DR Congo that are not connected to the national grid.

• DR Congo is endowed with critical minerals necessary for the energy transition. Yet ironically, it has invested nothing in tapping into this potential. Electrification rates are below 20%, and even worse for rural areas where it remains below 1%. The country's minerals have made the country gain global attention. Multinationals want to exploit its minerals but power is lacking.

• Mining companies are adopting their own power generation and imports to meet their mining demands. Recently, Kamoa Copper, one of Africa's largest mines, signed a deal with CrossBoundary Energy for the construction of a 222 MW solar system integrated with 526 MWh of battery energy storage for baseload power. The government is also increasing its grid capacity and it is developing a 56 MW solar plant with 22.5 MWh battery storage.

• DR Congo is part of the World Bank and AfDB's electrification initiatives and is receiving support from them. Plans are underway to electrify 60 million people by 2030 using both on-grid and off-grid solutions. The country is working to incentivise private sector participation and harmonise tariff regulations with neighbouring countries to facilitate electricity trade.

• Despite the guaranteed demand, few companies have invested in DR Congo's energy sector. Energy start-ups like MOPO are providing rental batteries for rural people who cannot afford to purchase the product outright. Nuru is deploying mini-grids and metro-grids in rural and urban areas, respectively. But the risk of conflict in the mineral-rich country deters investors from fully committing to expand their market reach.

Our take

• The AfDB stands as a primary choice for fundraising, as the project aligns with its mission to expand energy access. However, its capacity is stretched given the significant funding gap in Africa. Other Development Finance Institutions can also help inject long-term debt.

• The country, however, faces major security challenges. The government should provide necessary support, and political stability must be a top priority. Investors should remain cautious.

• We expect the fundraising to succeed, but this will come at a high cost given the risk profile for DR Congo. As part of their risk management, investors will likely impose higher repayment interest rates.