The Multilateral Investment Guarantee Agency (MIGA) has issued a guarantee of $5.67 million in support of a solar plus storage project in Somalia. The subsidiary of the World Bank Group will cover the risks associated with investments in Norwegian renewables firm Kube Energy which is involved in the project development.
The solar plus storage facility will be developed in the city of Baidoa in South West State. Kube Energy in collaboration with the State government will build this solar PV farm of 2.8 MW capacity with a 4.8 MWh battery energy storage system.
MIGA has partnered with renewable energy investment company CrossBoundary Energy to launch Kube Energy Somalia. The MIGA’s guarantee will cover Kube Energy’s capital and debt investments in its Somalian subsidiary for up to 15 years against various risks. The special purpose company has signed a long-term power purchase agreement (PPA) with the UN mission in Baidoa.
The future solar energy facility will supply renewable power to the United Nations compound in the city, as well as other international organizations, government offices, and utilities. The solar power plant is expected to produce 4,000 MWh of energy per year.
The Baidoa solar plant will help the UN facility in reducing the environmental footprint of its operations. The hybrid solar power plant is expected to cut off fuel consumption by approximately 1 million liters per year, avoiding approximately 2,800 tonnes of CO2 equivalent emissions per year.
According to MIGA, its risk exposure under guarantee will be shared with the International Development Association’s private sector window (IDA-PSW) and the Renewable Energy Catalyst Trust Fund (RECTF) through a ‘first loss’ guarantee system. Established in 2022, the RECTF is a multi-donor trust fund managed by MIGA with support from Norway’s NORAD and the Japanese government.
Hiroshi Matano, Executive Vice President of MIGA, said, the organization supports investments in renewable energy infrastructure in Somalia’s fragile markets. Through this kind of transaction, MIGA contributes to the UN’s aim to reach its 80% energy target in the country. The project will serve as a model for other international organizations seeking to encourage clean energy access for the communities and governments in Africa.
World Bank estimates the share of electricity generation by isolated diesel-powered mini-grids in Somalia’s energy mix is around 90%. Kube Energy has planned to distribute a portion of the electricity generated by the solar plant to the local population with support from local authorities. The plant will be handed over to the Somali government after the completion of 15 years of its commercial operation.