UK to guarantee Ksh.9.6B AfDB loan towards upgrade of Kenya’s power transmission line

The African Development Bank (AfDB) and the United Kingdom have announced the selection of Kenya’s Transmission Network Improvement Project as a beneficiary project under the Room to Run Sovereign transaction (R2RS).

As such, up to Ksh.9.6 billion ($59 million) of the Ksh.18.9 billion ($116 million) total project cost corresponding to the climate mitigation component of the loan was facilitated by additional capital from the UK government guarantee.

The project was approved last year and complements the UK’s bid to address transmission network capacity limitations, reliability and quality of electricity supply, and high-power system losses in Kenya.

“Powering economies requires power for people. We’re working together with the AfDB and Kenya to deliver what Kenyans want and need; reliable power for reliable economic growth – all with green energy that protects the prospects of future generations. The UK and Kenya are going far and going together,” Neil Wigan OBE, High Commissioner to Kenya said.

Announced at COP26 in November 2021, R2RS is helping the development finance institution lend more funding for critical climate change projects.

Under R2RS, a Ksh.326 billion ($2 billion) guarantee is provided to the Bank by the UK government ($1.6 billion in cover) and City of London insurers ($400 million).

By assuming a portion of the credit exposure on a part of the Bank’s sovereign portfolio, R2RS enables the Bank to provide up to an additional $2 billion of climate finance to Africa by 2027, split between adaptation and mitigation.

In May last year, the UK and AfDB announced the first two projects that were enabled by R2RS; an Egyptian wastewater project and a water sanitation project in Senegal.

“This transaction is one of several projects constituting its lending programme through which the African Development Bank fulfils the call by stakeholders at COP27 for MDBs to innovate and scale up climate finance through the Multilateral Development Banks,” African Development Bank Vice-President for Power, Energy, Climate and Green Growth, Kevin Kariuki.

Kenya’s power transmission upgrade project is set to extend and reinforce the country’s national electricity grid system and AfDB’s Last Mile Connectivity Program.