Tanzania completes mega dam

From the newsletter

The 2,115 MW Julius Nyerere Hydropower Plant (JNHPP) project is complete, adding enough capacity to meet Tanzania's peak demand. The project was fully funded by the government at $2.9 billion and constructed by African contractors in a joint venture between two Egyptian companies.

• The JNHPP is the largest completed hydropower plant in Africa. However, it will be overtaken in size by other big dams under construction, such as the 6,450 MW Grand Ethiopian Renaissance Dam (GERD) and the 2,400 MW Batoka Gorge Dam, which is a joint project of Zambia and Zimbabwe.

• The Tanzanian dam is expected to lower electricity costs by 10% and lead to an increase in GDP growth of two to three percent, according to World Bank estimates.

More details

• Construction on the JNHPP project began in 2019, undertaken by a joint venture between two Egyptian companies: the state-owned Arab Contractors Company and the privately owned El Sewedy Electric. This project follows the GERD dam as the second major dam initiative in Africa, primarily financed through domestic revenue, although the GERD dam's construction was carried out by Chinese entities.

• Currently, Tanzania depends on natural gas for over 60% of its electricity generation, with hydropower contributing 32%. Looking ahead, the country aims to boost the share of renewable energy in its generation mix to 75% by 2030. A key part of this strategy is the establishment of a Renewable Energy Independent Power Producer Procurement Programme (REI4P) by June 2026. This programme targets the installation of 463 MW of solar, 500 MW of wind, 130 MW of geothermal, and a substantial 880 MW of large hydropower capacity.

• Historically, securing financing for hydropower projects in Africa has been challenging. Investors are often deterred by the inherent risks, including lengthy construction periods and the potential impact of political changes on project continuity. Large plants like the DRC's 40,000 MW Grand Inga Dam and Egypt's pumped storage hydropower plant in the Ataka Mountains have failed to raise funding.

• However, lately, there has been an increased appetite for renewables projects. Over the last three months, we tracked six hydropower projects, totalling over 1,700 MW, that received over $6.5 billion in funding. This included two major projects: a 500 MW project in Cameroon and a 358 MW project in Malawi, plus other small hydropower projects in Burundi and Uganda. Though bigger projects sometimes still rely on multilateral development banks and Development Finance Institutions (DFIs), the private sector is increasingly involved in smaller projects through Public-Private Partnerships (PPPs).

• African commercial banks have expressed less appetite for financing hydropower plants. They have focused mainly on solar and even in some countries shied away from bigger solar projects. South African banks are the most active, financing both wind and solar projects.

• However, Africa's demand for electricity is projected by the IEA to grow by an average of 4% annually until 2027. Yet, most African countries are not prepared to meet this demand. Tanzania stands to benefit from electricity sales to its neighbours facing energy challenges, such as Malawi, Zambia, Kenya, and other countries within the Southern African Power Pool market.  Estimates suggest these exports could generate between $300 million and $600 million annually by 2030, a big boost to its economy.

Our take

• It is high time that African countries pursued internal funding and the sourcing of African contractors. It has worked in Ethiopia and Tanzania's mega dam projects. This is proof that we don't need external financing for major projects. This way, we ensure African resources and revenues benefit each other rather than enriching other developed countries.

• Of course, this isn't a straightforward path. There are many challenges, especially loopholes in government policies and regulations that promote corruption. These need to be fixed first to ensure governments' revenues get better use and accountability.

• Hydropower will surely rise again. The once-forgotten giant will even have a bigger role to play in the renewables agenda, particularly in meeting baseload demand. Investors should be on the lookout for investment opportunities in countries like the DRC, Ethiopia, Tanzania, Malawi, and Kenya, to mention a few, where there is huge potential for hydropower development.