With a portfolio of 320 MW projects in operation and under development in several African countries, Hydroneo East Africa is one of the rising stars on the continent’s energy scene. The company specialises in the construction of run-of-river power plants. For its founder Samuel Zekri, who is delighted with the official relaunch of his 10 MW Mpanda project in Burundi, these types of power stations offer a number of advantages, particularly in social and environmental terms.
AFRIK 21: The Burundian government has just approved the power purchase agreement (PPA) for the Mpanda hydroelectric power station. Will this decision allow the project to be officially relaunched?
Samuel Zekri: This is good news. In concrete terms, the decree approves the public-private partnership (PPP) and the PPA. This is a model PPP in which the Burundian government will provide its support in obtaining permits, managing the land and securing the project’s revenues over time, through the PPA, which is genuinely bankable. As a private-sector player, we will provide technical expertise, financial resources and effective risk management in terms of planning, costs and project quality. So it’s a real synergy between the public and private players.
So we’re delighted to have the project validated by presidential decree after four years of development. The government started the project in 2011 before stopping it in 2015. Hydroneo will join the project via an initial memorandum of understanding in 2019. Since then, we have been working on several aspects. We have completely redesigned the project, because initially the government was counting on a 40 metre high dam that would flood 120 hectares of the Kibira sacred forest. This would have a huge environmental impact. The plan was to lower the level of the dam to 10 metres, reducing the flooded area to 5 hectares.
We also set up various partnerships with the Burundian Ministry of Energy, the Office burundais pour la protection de l’environnement (OBPE) with the establishment of management agreements, the Régie de production et distribution d’eau et d’électricité (Regideso) for the PPA and the connection to the network, the financial structuring, and of course the environmental and social study to international standards, which will make the project bankable.
How far have you got with raising the finance?
At Hydroneo, we internalise the technical capacity with our team of experts, who are also present in the countries concerned to manage the process of obtaining permits and understanding the local environment. For the financial side, we have a strategic partnership with Finergreen, a company specialising in the financial structuring of renewable energy projects in Africa. With Finergreen, we have selected first-rate partners, in particular the Renewable Energy Performance Platform (REPP), which has already participated in Hydroneo’s first fund-raising for the Mpanda project, with a commitment of €4 million.
As far as the debt tranche is concerned, a good number of international lenders have shown an interest. We are in fairly advanced discussions with some of them, and we will be able to announce the groups of lenders we have selected shortly. We are expecting 75% debt and 25% equity or quasi-equity, financed by Hydroneo East Africa and our co-investor, REPP.
When will you achieve financial close?
We hope to reach financial close within the next 12 months.
Let’s go back to the technical aspects of the Mpanda project. The government of Burundi wanted to build a hydroelectric power station with a water reservoir. Hydroneo opted instead for a run-of-river plant. What is the difference between these two techniques?
Hydroneo’s mission is to provide clean electricity that respects the fauna, flora and population. So all our projects involve the construction of run-of-river power stations. This means that we will be turbining the water as it flows down the river. The production of electricity is completely concomitant with the flow of water in the river, unlike a reservoir power station, which will have a dam, usually quite high, to store the water. Water storage also means a vast flooded area, with a significant social and environmental impact.
With our run-of-river plants, we have the advantage of having a low environmental and social impact. However, we lose the possibility of having this reservoir of water that allows flexibility in production. In other words, for these types of power station, we need to predict the flow of the river. To do this, we carry out an in-depth hydrology study to find out what the river flow will be over the long term. We try to define the power station in such a way that it is not oversized. The danger is in oversizing a power station that will end up turbining less water.
We are taking a close look at new technologies, in particular the analysis of all this data using artificial intelligence to correlate rainfall in the catchment area with the flow at a given point in the river. After that, there are other ways of stabilising this inflow of water, such as maintaining the catchment area, i.e. the receptacle for the rainwater that leads to the point in the river that interests us. A well-vegetated catchment area will better regulate the rainwater that reaches the point of interest.
Is such a plant suitable for large rivers?
Small rivers tend to be at altitude. But in the valley, the river widens. There are very large run-of-river power stations. And we know how to adapt run-of-river dams to large rivers.
Aren’t run-of-river power stations more exposed to drought?
There are naturally dry areas that are not very suitable for this type of power plant. We’re targeting areas closer to the equator, where we’re more concerned about seasonal changes, with periods of huge downpours and drier periods. We’re going to have the same volume of water but it won’t be distributed as well. That’s why it’s important to carry out studies well in advance so that we can predict these seasonal changes.
Hydroneo plans to install such infrastructure in several countries in sub-Saharan Africa, with a portfolio of projects under construction and development in Rwanda, Tanzania, Kenya, Gabon and Sierra Leone. How are these sites identified?
Hydroneo, which I set up 6 years ago, actually started in Rwanda. We started up the first plant at the beginning of 2023. We have two other plants under construction in the country. Since then, we have continued to expand our activities in East Africa, particularly in Uganda, Kenya, Tanzania and Burundi, and we recently signed memorandums of understanding in Gabon and Sierra Leone for a portfolio of 31 projects, representing a total capacity of 320 MW. Other countries on the continent are under consideration.
What parameters do you use to select sites?
For a good site, you need: firstly, a favourable legal framework, i.e. a well-defined process for obtaining permits and a bankable power purchase agreement (PPA). Secondly, we need a technical configuration that allows the project to be implemented, i.e. the hydrological, topographical and geotechnical aspects to ensure the stability of the structures. These technical aspects must enable us to produce a design that ensures we can obtain electricity at market prices.
What about the electricity transmission infrastructure?
Yes, of course. And also access infrastructures. This is very important, because you can have a site that has all the required characteristics, but if you have to build 100 km of road or transmission line in a Gabonese rainforest, from the point of view of financial viability, it’s not going to work. And we need to be able to implement the project in a way that respects social and environmental constraints.
Today, more than 550 million Africans still have no access to electricity. The quickest solution being considered all over Africa is solar power, which is relatively easy to install and less expensive. Doesn’t this also explain the lack of interest among financial partners in small-scale hydroelectricity?
It’s true that solar energy is very popular. A little for wind power, but mainly for solar power. Today, there’s a real frenzy in Africa, where between 550 and 600 million people are not connected to the electricity grid. There’s an urgent need, and we’re going to need all sources, whether solar, wind, hydroelectric or geothermal. We need to push on all fronts. Each solution has its advantages and disadvantages.
Solar power is quicker to implement, but it is intermittent. Hydro provides the grid with stable electricity, but there are many technical challenges to overcome. These are the technical challenges that need to be addressed if hydroelectric projects are to develop further.
Hydroelectric projects take a long time to implement. Can a hydroelectric plant be built in two or three years?
First of all, we need to put the long timeframe into context. When a hydroelectric plant is built, it is for a period of 100 years or more. It takes time to prepare for the implementation of such a project. To shorten that time, you need to master three things. Firstly, the technical side, because as soon as the site is identified, you need to have the necessary skills to determine the viability of the project. There are far too many projects developed by people who are not experts in their field, and who end up getting stuck in the development phase. With in-house technical skills, you don’t have to worry about this. The second asset you need is an understanding of the local environment, i.e. local teams who know how to navigate the country’s environment, find the right partners and obtain permits quickly. And the third point is mastering the financial mechanics, i.e. having the resources to finance the development of the project from your own funds, knowing how to structure the financing and having the right financial partners to bring the project to a successful conclusion.
These are all factors that can accelerate the development of the project. Mpanda is already 4 years old. Taking over a project is complex. But with our organisation, we’re able to reduce the time taken.
How can the development of small-scale hydroelectricity in Africa be facilitated and accelerated? Are African countries prepared for PPPs?
We need to work with public authorities, if only to obtain permits. The government is the counterparty that will buy the electricity from us, and it is often the only one that can provide this guarantee.
And in the various countries, is there good preparation for PPPs?
As I said earlier, you need a clear and stable legal framework. And so far, we’ve had good discussions with the authorities in the countries where we operate.
So it’s pretty easy to set up PPPs?
There are challenges in every business, otherwise we wouldn’t be here.
What about administrative delays?
I’m going to address that in a different way. There are administrative delays in every country in the world. After that, we can go into the details of each country’s procedures. And every administration is different. But I can see that administrations are keen to move things forward, despite the administrative constraints. After that, it’s up to us to understand and help make things run more smoothly.
Samuel Zekri, you founded Hydroneo 6 years ago. How did you end up developing hydroelectric projects in Africa?
I’d like to be able to tell you that I’ve always wanted to operate in Africa, but now that I’m here I’ve forgotten. Otherwise, it’s a matter of circumstance. I developed the hydro investment branch of a French turbine manufacturing group. At the time, I proposed raising funds to avoid financing projects with equity in developing countries, in South-East Asia, Latin America and Africa. By chance, all the funds wanted to invest in Africa and the first development platforms I set up were African. As a result, I fell in love with the continent.
Interview by Jean Marie Takouleu in Paris