AFRELEC: AfDB approves $83.6mn grant for Ethiopia-Djibouti power link

The African Development Bank (AfDB) has approved two grants worth $83.6mn to boost cross-border trade in electricity between Ethiopia and Djibouti and to deepen integration in the Horn of Africa sub-region.

The funds comprise a $69.65mn grant to Ethiopia and a second grant of $13.93mn to Djibouti, both sourced from the African Development Fund, the AfDB’s concessional financing window.

The Ethiopia-Djibouti Second Power Interconnection project will entail the construction of nearly 300 km of interconnector line, 170 km of transmission lines, and new construction or renovation of substations in the two countries.

“The first interconnection line is reaching its power transfer capacity limit due to several developments in both countries, such as the industrial development in the eastern part of Ethiopia, the railway line from Djibouti to Ethiopia (powered by electricity), and the port expansion in Djibouti. The two countries have thus decided to develop the second power interconnection line to maintain energy security and reliability for Djibouti,” said Mr. Batchi Baldeh, the Bank’s director of power systems development.

Project completion is anticipated to increase Ethiopia’s power export revenue while also boosting Djibouti’s access to reliable and affordable clean electricity, lowering costs to below $0.10 per kWh. Other expected impacts in Djibouti include a more conducive environment for businesses and job creation for youth, as well as lower greenhouse gas (GHG) emissions.

In 2004, the bank financed the first power interconnection project between the two countries. This second project is expected to build on benefits achieved over the last 10 years, including a 65% increase in customer connections in Djibouti and a sharp reduction in the use of thermal generation plants from 100% to around 16%. Ethiopia has earned $275mn in revenue from power exports over the same period.

The project is aligned with the bank’s East African Regional Integration Strategy Paper, which seeks to promote regional infrastructure for economic transformation.