22410 - Kounoune Power S.A.

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Summary of Proposed Investment

Project Number

22410

Company Name

KOUNOUNE POWER

Date SPI Disclosed

Apr 6, 2005

Country

Senegal

Industry

Infrastructure

Projected Board Date

May 12, 2005

Status

Completed

Sector

Heavy Fuel Oil - Thermal Power Generation

Department

Regional Industry - INF Africa

Environmental Category

B - Limited

Previous Events

Approved : May 17, 2005
Signed : Dec 7, 2005
Invested : Dec 22, 2006

Project Description

Kounoune Power or the project company is to develop, construct, operate and maintain a 67.5 MW Heavy Fuel Oil (HFO)-fired diesel power generation plant located at Kounoune, about 23 kilometers east of Dakar, in Senegal. The project is to be developed as an Independent Power Producer (IPP) selling power under a 15-year Power Purchase Agreement (PPA) to Société Nationale d’Electricité du Sénégal (Senelec), Senegal’s state electric utility, which will be the sole offtaker of the project. The PPA was executed by and between the project company and Senelec on February 5, 2005, and entered into effect on February 28, 2005. Senelec’s obligations under the PPA are guaranteed by the Government of Senegal (GoS), also executed on February 5, 2005.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	19.90
Equity

Development Impact

At commissioning, the project is expected to be one of the most efficient plants operating in Senegal, with the second lowest variable operating costs only after the Manantali hydro power project (a World Bank financed project in Mali, developed under the Senegal River Basin Organization, which allocates approximately 60 MW of its capacity to Senegal). Therefore, the project should contribute to reduce Senegal’s generation costs.

Additionally, the project will provide base load generation capacity of 67.5 MW to Senegal’s interconnected system and, due to its convenient location, it is also expected to add flexibility in handling electricity demand as well as to improve the system’s overall stability and reliability. Furthermore, the implementation of the project is critical for Senegal in order for the country to meet its fast growing electricity demand and, therefore, to avoid the power shortages that may occur during the coming dry season.

Consequently, the combination of reduced electricity costs and greater availability of power are likely to increase the productivity of other sectors in the economy, support new investments and, ultimately, promote economic growth. Finally, it should be noted that the Project would be the second IPP in Senegal to be developed by the private sector. This is particularly important in the current context, in which the significant level of investments required by Senegal’s power sector are rapidly lagging behind, while there has been a sharp decline in the overall level of infrastructure financing in Africa. Consequently, the successful implementation of the project is expected to enhance the attractiveness of Senegal’s power sector and, more specifically, facilitate the implementation of Senelec’s investment requirements in the generation sector, for which the development of future IPPs will be critical.

IFC has played an instrumental role since the initial stages of development of the project and continues to do so during the financing stage. Since 2001, IFC made a strategic decision to devote considerable resources to support Senegal’s power sector reforms and, more specifically, to facilitate the development of this project. Early in 2002, and following the GoS two failed efforts to privatize Senelec, IFC, in its capacity as a prospective lender, together with the World Bank, advised the GoS to develop an IPP in order to meet the immediate electricity needs of the country. The World Bank Group, including IFC, demonstrated its support to the Project by providing at the time an indication of interest, included in the bidding documents, to offer IFC debt financing, IDA partial risk guarantees (“PRG”) and/or MIGA guarantees, respectively, to the winning bidder. As a result, in addition to IFC’s investment described above, the Bank is currently proposing an IDA PRG of up to the US Dollar equivalent of €5 million which, in combination with the proposed €4.1 million PRG from the Groupe Agence Française de Développement (AFD), will allow the project company to raise a €9.1 million equivalent in long-term local currency financing. Therefore, the project company would have access to long-term financing both in Euros and local currency that better matches the project’s revenue structure. Finally, by supporting the project, IFC is sharing its experience in the sector with the Sponsors as well as with other financial institutions, ensuring that the project is bankable and that it establishes a standard that can be replicated by other IPPs in West Africa as well as by private investors in infrastructure in the region.

The following environmental and social issues were reviewed and summarized in the Environmental Review Summary:

- Environmental Assessment and Public Consultation;
- Site Selection and Land Acquisition;
- Buffer Zone Requirement and Possible Relocation of School and Houses;
- Air Emissions and Air Quality Impact;
- Noise;
- Water Supply and Wastewater;
- Solid and Liquid Waste and Incinerator;
- Fuel Storage and Risk Assessment;
- Greenhouse Gas Emissions;
- Health and Safety Management and Emergency Response Plan;
- Future Plan for Expansion of Kounoune Power Plant Complex;
- Associated Facilities (Fuel Pipeline and Transmission Line);
- Environmental and Social Action Plan; and
- Corporate Social Responsibility Initiative.
Location of environmental documents In locally affected community
Environmental documentation can be found at the following locations:

- Préfecture de RUFISQUE : Rue Adama LO, BP 14, Rufisque
- Sous –Préfecture de SANGALKAM : BP 573 Rufisque
- Communauté Rurale de SANGALKAM : BP 573 Rufisque
- Hotel de Ville de RUFISQUE : Boulevard Maurice Gueye, BP 30 , Rufisque
- Service des Eaux et Forêts de RUFISQUE : Rue Adama Lo , Rufisque

Contacts

For Inquiries About the Project, Contact

Mr Aly NDIAYE :
Route du Front de Terre
BP 11548 Dakar
(tel : 221- 824 39 19)

Mr Said JALKH :
Kounoune Power
email : said.jalkh@matelecgroup.com
( tel:221- 609 33 05)

Mr Daniel GALLICE :
email : daniel.gallice@mitsubishi-power.com
( tel:33- 32732 4841) for technical aspects

This Summary of Project Information (SPI) is prepared and distributed to the public in advance of the IFC Board of Directors' consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC's activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. The following SPI is disclosed in accordance with IFC's Disclosure of Information Policy that went into effect September 1998.

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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