SADC – Angola lauca hydro power plant

The DBSA partnered with the Deutsche Bank in the USD4 billion sovereign loan to the Ministry of Finance in Angola for the development of the 2 070 MW Lauca Hydroelectric Power Station. The Angolan Ministry of Finance mandated Banco Nacional de Desenvolvimento Economico e Social (BNDES) (the Brazilian Development Bank) and Deutsche Bank as lead arrangers. The DBSA is funding USD70 million of the project for the supply, installation and commissioning of the electromechanical plant (turbines, transformers, etc.).

The project represents Angola’s most important hydroelectric facility in an expansion programme that will add about 5 610 MW, to the existing 1 254 MW of additional capacity by 2020. The Kwanza River, downstream from the existing Capanda Hydropower Plant (580 MW), has the potential of 7 000 MW with four power plants planned for development along the Kwanza River Basin.

The EPC contract was awared one of the four largest construction companies in Brazil, on a turnkey basis. The EPC contract was signed on 15 April 2013 and work started on 30 July 2013. The project was divided into three phases:

  •  The first phase was the Kwanza River Diversion, 2 x 800 m tunnels and control structures;
  • The second phase covers the main civil works, including the construction of the following structures: RCC Dam, water intake, tunnels and penstocks, main powerhouse (2 004 KW), ecoflow powerhouse (65.5 MW), access roads and service tunnels, 400 kV and 200 kV substations, discharge channel; and
  • The third phase was to comprehend the supply, installation and commissioning of the electromechanical plant.

The project is in line with the DBSA’s mandate and the Coverage Division’s strategy to support infrastructure projects in the energy, transport and water sectors in the SADC region.1 In particular, the project meets the DBSA’s objective of supporting African governments in the development of key infrastructure assets to enhance and promote regional integration. The project has many and varied benefits, in terms of its development impact, for the local communities in Angola and for the region, including the following:

  • Increased electricity
  • Long term economic growth of the country
  • Infrastructure development in and around the project site
  • Employment creation

On strategic partnerships, the DBSA became a partner and signatory to the Framework Agreement on Financial Cooperation within the BRICS Interbank Cooperation Mechanism, on 13 April 2011 in China. The framework was signed with Banco Nacional de Desenvolvimento Economico e Social (BNDES), the State Cooperation Bank for Development and Foreign Economic Affairs (Vnesheconombank-Russia), Export-Import Bank of India, and the China Development Bank.

The objective of the agreement is to strengthen and develop long term partnerships and relationships among the BRICS institutitons and, in the process, develop good trade and economic relations between these financial institutions.

Under the Framework, the BRICS Development Banks signed the Multilateral Co-financing Agreement for Africa on 27 March 2013 in Durban, South Africa with the objective of promoting the development and co-financing of projects of mutual interest on the African continent. According to Article 1 of the BRICS Banks’ Agreement, the institutions must attempt toenter into bilateral partnerships and cooperation “…to explore  the structuring and co-financing of projects of mutual interest.”

BNDES is the largest lender in the Angolan Lauca Hydro Power project. To enhance the BRICS partnership cooperation and in co-financing of projects, the DBSA utilised the Angolan situation as an opportunity to build its relationship with BNDES and, in the process, explore other project opportunities that DBSA and BNDES can co-finance in the future in pursuit of their respective mandates.