Risk mitigation instruments for renewable energy in developing countries: A case study on hydropower in Africa
This case study examines the 250 megawatt Bujagali Hydropower Project in Uganda, which raised close to US$300 million in commercial loans and private equity, an unprecedented amount of private finance in a low income country. The study is explored from a project finance perspective. It is one of very few examples of large project finance structures simultaneously to use different risk mitigation instruments provided by the World Bank Group—a partial risk guarantee from the International Development Association; and the Multilateral Investment Guarantee Agency’s political risk insurance. It offers an opportunity to analyze how these particular instruments interact, and how effective they are in driving private investment and reducing the cost of renewable power in developing countries with high investment risks and very little private investment. The study also examines how these instruments might be applied to drive private investment in other renewable energy projects in developing countries.