Once constructed, the project will add nearly 15% to the generation capacity of Burundi’s grid. It is hoped that the success of the project will create an enabling environment for further foreign investment in the country’s energy sector, by demonstrating the government’s willingness and ability to enter into bankable project agreements. It is estimated that the project will be able to supply the electricity needs of about 87,600
people and businesses; provide 300 part-time jobs during construction, and support up to 50 permanent jobs during the operational phase.

The project will have a substantial positive impact on Burundi and exemplifies the important role that the private sector has to play in boosting Africa’s electricity supply with affordable renewable energy.

The project is supported and co-financed by UK-based Renewable Energy Performance Platform(REPP), Inspired Evolution via its Evolution II Fund, and the United States International Development Finance Corporation (DFC), formerly the Overseas Private Investment Corporation, or OPIC.

It all started with Rwanda…
Gigawatt Global’s Rwanda project is East Africa’s first utility-scale solar photovoltaic (PV) plant. The 8.5MW solar power plant is built on land owned by the Agahozo-Shalom Youth Village, whose mission is to care for Rwanda’s children orphaned or affected by the Rwandan genocide.

On February 9 2015, the plant began exporting solar-generated electricity to Rwanda’s national grid, twelve months after it reached financial close, increasing Rwanda’s generating capacity by 6% and electrifying 16,000 new households.

As a consequence of the positive publicity surrounding the Rwanda project, Gigawatt Global was approached by a Burundian national who wanted to use his land for communal good,
harnessing commercial drivers with a moral imperative – noting that Burundi is one of most poverty-stricken countries on earth, with per capita gross domestic product of only US$320.

Having undertaken preliminary market analysis, Gigawatt Global approached the Burundian authorities with a proposal to replicate the success of the Rwanda project in Burundi.

Procuring land
The project company has access to land by way of a land lease agreement concluded with the private landowner referenced above. By way of agreement, the lessor grants the project company the right to the use, enjoyment and occupation of the land for purposes of constructing, operating and maintaining a solar PV power plant.

A rigorous process was undertaken – including a full review of the land title at the land registry in the local province of Gitega, where the site is located – to ensure the veracity of the lessor’s title as sole legal and beneficial owner to the site; and a review of the land title to positively ascertain that no other person, including within the lessor’s family, has a claim on the site and/or the project.

The power plant is constructed on private land, which positively impacted the corresponding regulatory analysis.

Public procurement
Law No 1/14 dated April 27 2015 in relation to public-private partnership (PPP) agreements provides that procurement of PPPs can be done via three types of public procurement. In the event of an unsolicited offer, a tender must be organised. However, Law No 1/13 of April 23 2015 on the reorganisation of the electricity sector in Burundi, provides that a power plant located on public land requires a PPP agreement or concession, while a power plant located on private land requires an authorisation from the Ministry of Energy to build and operate a power plant.

As the project is located on private land, from a regulatory perspective the project required plant authorisation and a PPA.

Generation licence
A lack of cohesive regulatory structure and no market precedent to follow or take comfort from were some of the challenges faced by being a first-to-market IPP.

A case in point is the question of whether the project required a generation licence. Pursuant to a power plant development decree dated June 23 2016, reference is made to the fact that an operating licence is granted to IPPs by the Energy Regulatory Agency upon successful commissioning of a power plant. However, the remainder of the decree does not substantively refer to this licence. Further, there is no mention of such a licence in the Law No 1/13 of April 23 2015 on the reorganisation of the electricity sector in Burundi. Although the existing legal framework does not appear to require a generation licence, the Energy Regulatory Agency considers that this licence is mandatory and the PPA required that such licence must be issued before the power plant is able to operate. The Energy Regulatory Agency, therefore, issued such generation licence to the project company on July 18 2017.

Project documents
The project company entered into a 25-year power purchase agreement (PPA) with Régie de Production et Distribution d’Eau et d’Electricité, (REGIDESO); a partnership agreement entitled “Accord de partenariat” with the Government of Burundi; a government guarantee entitled “Convention de garantie” with the Government of Burundi and received the benefit of a Central Bank comfort letter.

Absent grid code
Burundi did not have an official grid code at the time of the project’s inception. Instead, grid connection requirements are legislated for in guidelines named the Guide d’Exploitation du Systeme Electrique de la REGIDESO dated April 2015.

With a draft grid code in circulation, including inputs from IFC Advisory, it is expected that Burundi will issue a binding grid code in the foreseeable future. In order to protect the project company from unknown future obligations, the definition of Change in Law contained in the PPA expressly captures the enactment, adoption or promulgation of any Burundian grid code, in order for the project company to be able to benefit from corresponding change-in-law relief. In addition, given that it is unknown whether any future grid code will legislate for non-dispatchable technology, it was important to agree upfront that derogations would be provided to the project company.

Therefore, pursuant to the PPA, REGIDESO expressly acknowledges and accepts that in the event that a Burundian grid code is enacted, adopted or promulgated, and that such grid code contains provisions that a solar PV plant is not technically able to comply with, or it is not economically feasible for the project to comply with, then the Ministry of Energy and REGIDESO undertakes to grant a derogation to the project company in respect of such provisions.

In the absence of a grid code, or separate grid connection agreement, the PPA was required to legislate for grid connection requirements, such as the right for the facility to connect to the
national grid; operational interface; minimum grid specification; applicable standards and regulations; and any de-energisation process.

The delineation of responsibility for the construction, ownership, operation and maintenance obligations and liabilities and
associated costs in relation to the interconnection facilities has also been legislated for in the PPA.

Currency conversion
Typically, lenders and sponsors require that (i) PPA payments are made in the same currency as the loans issued under the financing documents;

or (ii) if the offtaker is not able to make, in this case US dollar-denominated payments, it adjusts payments made in local currency in the next invoice to ensure that the project company is not left exposed to currency fluctuations.

In Burundi, the paucity of US dollars makes payment in US dollars impossible. Since the offtaker is not able to make US dollar-denominated payments, the payments made in local currency must be adjusted in every invoice to ensure that the project company is not left exposed to negative currency fluctuations.

The PPA tariff is denominated and invoiced in US dollars but paid in Burundian francs using the exchange rate between US dollars and Burundian francs and vice versa, as published for that business day by the National Bank of Burundi on the date the invoice is paid.

Upon payment, the project company will possess Burundian francs, which will then be converted into US dollars in order to service offshore debt and equity obligations. A robust reconciliation mechanism was put in place contractually, including a comfort letter from the Central Bank, to ensure that the project company is paid sufficient amounts of local currency to enable it to convert all revenue amounts into US dollars and repay debt and equity amounts.

Liquidity support
As a first-to-market project, offtaker REGIDESO has no meaningful track record of payment history from which sponsors and lenders can derive comfort.

Ensuring robust credit enhancements therefore required particular consideration and effective mitigants to secure REGIDESO’s payments under the PPA and the project’s revenue stream. Not only is the project a first-to-market project, it had the additional challenge of being the first project to take a new risk mitigant to market, being the first project to be financed using the Regional Liquidity Support Facility (RLSF).

The RLSF can be accessed by IPPs located in countries that have signed the RLSF memorandum of understanding (MoU) and meet the RLSF’s criteria. To-date, seven countries have signed the MoU:
Benin, Burundi, Côte d’Ivoire, Madagascar, Malawi Uganda and Zambia, with several others in the pipeline. As Burundi is an ATI member country, a signatory of the MoU and fulfils the requirements of the RLSF, the project was able to utilise this innovative product and enter into the corresponding required documentation. The terms of use agreement entered into between ATI, the LC bank and the project company sets out the obligations of the parties and the governance of the RLSF.

The RLSF can be accessed by IPPs located in countries that have signed the RLSF memorandum of understanding (MoU) and meet the RLSF’s criteria. To-date, seven countries have signed the MoU:
Benin, Burundi, Côte d’Ivoire, Madagascar, Malawi Uganda and Zambia, with several others in the pipeline. As Burundi is an ATI member country, a signatory of the MoU and fulfils the requirements of the RLSF, the project was able to utilise this innovative product and enter into the corresponding required
documentation. The terms of use agreement entered into between ATI, the LC bank and the project company sets out the obligations of the parties and the governance of the RLSF. n