e African Development Bank, AfDB
and the Government of Djibouti Monday,
signed the funding agreements, totalingUS
$7.5 million, for a geothermal exploration
project in the region of Lake Assal.
A statement from the AfDB said the @-
nancing scheme includes a grant and a loan
fromAfDB’s soft loan arm, the AfricanDevelopment
Fund to the tune ofUS $5.3million
and US $0.4million respectively.
It also includes a grant ofUS $1.8million
from the Sustainable Energy Fund for
Africa (SEFA) AfDB’s Regional Integration
Director, Alex Rugamba, on behalf of Vicethat President, Infrastructure, Private Sector and
Regional Integration, Gilbert
Mbesherubusa, said during the signing ceremony,
“e exploitation of geothermal potential
in the Lake Assal region will enable
theDjiboutian population to access reliable,
renewable and affordable source of energy.”
e contribution fromtheAfDB and SEFA
will be used to continue to raise more @-
nancing and will serve as a catalyst to rally
independent geothermal electricity producers.
Speaking at the signing ceremony, Ali YacoubMahamoud,
Djibouti’sMinister of Energy
in charge of Natural Resources
commended the African Development
Bank for “breathing new life
into this 20-year old project”.
With this Hrst phase of the project,
the government of Djibouti is
taking the lead on the Hrst exploration
and appraisal drilling phase.
e private sector will be responsible,
in a second phase, for the production
drilling, steam gathering
system and electricity production
and evacuation to the national grid.
Geothermal development has
known a boost in east Africa during
the past two years, and has
been attracting more and more private
investors, thanks to new H-
nancing schemes put in place by
development Hnance institutions
such as the African Development
Bank.
“ose innovative models help
overcome the several risks associated
with geothermal development,
among which the most
important one is the exploratory
drilling risk, which is related to the
probability of hitting dry wells during
the exploration and appraisal
drilling phase,” said Youssef Arfaoui,
Chief renewable energy specialist.
“By providing concessional
Hnance to the early stage and highrisk
activities mainly related to exploration
and drilling, the African
Development Bank paves the way
for private investors to step in,” he
explained.
e AfDB has successfully used
that innovative model in 2011, for
the Menengai Geothermal Development
Project, supported by concessional
Hnancing to the tune of
Us $150 million.
e Menengai project, once completed,
will increase the energy
supply in the country by an
amount equivalent to the current
consumption needs of 500,000
Kenyan households, 300,000 small
businesses and some 1,000 GWh
for other businesses and industries.
At a much smaller scale, the Lake
Assal geothermal exploration project
will help expand geothermal
development, by building regional
capacities, to other rift Valley
countries in sub-saharan Africa
such as ethiopia, Uganda, tanzania
and rwanda, which have considerable
geothermal resource
development potential.
Currently Djibouti relies mostly
on fossil fuels and some hydropower
imports from ethiopia.
e majority of the country’s
current generation capacity is situated
in Djibouti City. e existing
power stations are old, polluting
and expensive to operate. in addition,
fuel imports are expensive
and require important foreign-currency
expenditure