Kube Energy Baidoa
On January 12, 2023, MIGA entered a contract issuing a guarantee of US$5.67 million to Kube Energy of Mauritius for its equity investment in the Kube Energy Somalia LLC solar PV hybrid power plant project in the Federal Republic of Somalia. The guarantee is issued for up to 15 years against the risks of expropriation and war and civil disturbance. This is MIGA’s first project in Somalia (a new MIGA member country in March 2020).
Located in the ‘green zone’ in Baidoa, Somalia, the Project will provide 24/7 electricity to the United Nations Support Office in Somalia (UNSOS) through a power purchase agreement (the UNSOS PPA), the first of its kind in Somalia. Leveraging a creditworthy off-taker such as the UN enables investment in clean and modern energy infrastructure, addressing a key barrier to the expansion of renewable energy in many Fragile and Conflict-Affected Situations (FCS) contexts. The Project will replace existing diesel generators, significantly reducing green-house gas (GHG) emissions and the cost of electricity while increasing reliability of electricity supply within the green zone.
The UNSOS PPA also serves as a foundation for the expansion of clean energy to non-governmental organizations and state government offices in the vicinity. Pursuant to the Memorandum of Understanding with the Government of the SouthWest State of Somalia (GoSWS), the power plant ownership will be transferred to the local government after 15 years of commercial operation.
MIGA’s risk exposure under the guarantee will be shared with the IDA Private Sector Window (PSW). For more information on the IDA PSW, please access the IDA19 Private Sector Window website here. The PSW involvement will be via a shared first loss facility that will assist in spreading the risk and result in a reduced cost of the guarantee for the project enterprise. The Project meets the minimum concessionality principle and the amount of subsidy is estimated to be less than 2.9% of the total project cost over the envisaged 15-year guarantee period. MIGA’s risk exposure is also shared with the Renewable Energy Catalyst Trust Fund.
The Project is a category B under MIGA’s Policy on Environmental and Social Sustainability. Click here to view the Environmental and Social Review Summary.
The Project’s positive development impact will be driven by significant GHG emissions savings, as the solar power produced will displace diesel generators, which are highly pollutive. The Project will enable UNSOS to transition its operations in Baidoa to approximately 80 percent renewable energy, supporting the UN’s efforts to reduce their energy footprint by transitioning field operations from diesel to renewable sources of power. The Project is innovative in that the energy service model could serve as a demonstration effect for other international organization groups operating in similar environments and seeking more renewable power solutions for field missions (which requires installation of permanent infrastructure). Moreover, the energy service model with a creditworthy international organization supports access to financing as well as the ultimate transfer of the power plant to the GoSWS after 15 years. Finally, the Project can demonstrate that even in highly fragile contexts, in a country with no national grid or power purchase agreement framework, investments into captive renewable power projects can be financially viable.
The Project aligns with the World Bank Group’s (WBG) Country Partnership Framework FY2019-2022 in Somalia under its Objectives of increasing access to renewable energy and improving the business environment and lowering barriers to entry. The guarantee also supports the Maximizing Finance for Development principals leveraging foreign direct investments in support of an innovative approach to catalyzing renewable energy and by reducing the use of scare public resources.