The Multilateral Investment Guarantee Agency (MIGA) has provided a guarantee of $29.1m in support of Tata Power’s equity investment in Itezhi Tezhi Power Corporation in Zambia. 

The guarantee supports the operation of a 120 MW hydropower station on the Itezhi Tezhi dam along the Kafue River. 

MIGA is providing coverage for up to 15 years against the risk of Transfer Restriction, Expropriation, War and Civil Disturbance and Breach of Contract.

Separate from the climate benefits, the power station – which is the first sizable private sector developed hydropower plant in Zambia - will service regional markets and provide employment to local communities.

“This project is a triple-win: it helps boost Zambia’s competitiveness by delivering reliable power, contributes to climate change mitigation through clean energy, and reinforces south-south investment,” said MIGA Executive Vice President and CEO Keiko Honda.

Hydropower remains the key source of energy generation in Zambia, accounting for 94% of the country’s electricity mix. 

However, the country’s total currently installed hydropower capacity is about 2,300 MW, while the potential is estimated to exceed 6,000 MW, which if realized, could be harnessed for both domestic consumption as well as exports.

Anil Sardana, CEO & MD, Tata Power, said: “The Itezhi Tezhi power plant is a shining example of how government and private businesses can work together for the betterment of society. Each unit of electricity that is produced from this power plant utilizes natural resources bestowed upon this country and in doing so maximizes value for all our stakeholders.”

MIGA’s guarantees are a key component of Tata Power’s global risk management strategy in support of its international diversification activities, including in Africa, away from fossil fuels and into renewables. 

Global commodity prices, international financing conditions, Zambia’s Doing Business ranking, and the IMF’s Debt Sustainability Analysis (DSA) were among the factors considered in MIGA’s provision of its guarantees for this project.

The project is registered as a Clean Development Mechanism (CDM) project with the UNFCCC, and will result in a reduction of greenhouse gas emissions of almost 590,000 tCO2e per year.

The project’s total cost is $239m, with a debt to equity ratio of 70:30. 

The African Development Bank, FMO - the Dutch development bank, Proparco - a subsidiary of the Agence Française de Développement, the Development Bank of Southern Africa and India EXIM are providing credit for the project. 

The Tata Power Company Limited and ZESCO, Zambia’s national power utility company are 50-50 equity owners in the project.