Kube Energy Solar Hybrid Project in Baidoa

Project description

This summary covers an application by Kube Energy Mauritius for its equity, shareholder loan, and/or quasi-equity investments in the Kube Energy Somalia solar hybrid electricity project in Baidoa in the Federal Republic of Somalia. The investors seek cover for up to USD 5.4 million against the risks of expropriation and war and civil disturbance for a guarantee period of up to 15 years. 

The initial phase of the Project is planned to provide 24/7 electricity to the United Nations Support Office in Somalia (UNSOS) and to international organizations and local government offices in the Green Zone. The Project may be expanded over time to serve more customers in the Green Zone and possibly to sell electricity to a local utility company.

The Project is planned to 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.

In 2018, Kube Energy and the Government of the South West State (GoSWS) of Somalia entered into a Memorandum of Understanding (MoU) guiding the development of the power plant. Pursuant to the MoU and other relevant project documents, the land for the Project will be leased from the GoSWS and the power plant ownership will be transferred to the local government after 15 years of commercial operation.

MIGA’s risk exposure under the guarantee is proposed to 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 2.1% of the total project cost over the envisaged 15-year guarantee period.  MIGA’s risk exposure is also proposed to be shared with the Renewable Energy Catalyst Trust Fund.

Environmental Categorization

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.

Development Impact

The Project’s development impact is expected to 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% renewable energy, and reduce annual fuel consumption by about 870,000 liters. The Project supports the UN’s efforts to reduce their energy footprint by transitioning field missions around the world from diesel power to renewable power. The Project is also innovative in that ownership of the plant will be transferred to the GoSWS after 15 years, which could serve as a demonstration effect for other international organization groups operating in similar environments and seeking more renewable power solutions (which requires installation of permanent infrastructure) for field missions. Finally, the Project can demonstrate that even in highly fragile contexts, in a country with no national grid or PPA framework, investments into captive renewable power projects can be financially viable.