R2RS-Room To Run Sovereign Selects Kenya’s Transmission Network Improvement Project as Beneficiary

The Room to Run Sovereign (R2RS), a transaction module initiated by the African Development Bank in collaboration with the government of the United Kingdom and three globally recognized insurance companies, has chosen Kenya’s Transmission Network Improvement Project as a beneficiary.

According to Nnenna Nwabufo, Director General for East Africa at the African Development Bank, Kenya is on the verge of achieving universal electricity access, primarily driven by a significant component of renewable energy. This achievement holds paramount importance for sustainable development and the global effort to combat climate change.

The selected project aims to extend and reinforce the national electricity grid system, aligning with the Last Mile Connectivity Program of the Bank. Addressing transmission system gaps is deemed a prerequisite for attaining universal electricity access and enhancing the quality of life in communities through improved socioeconomic development.

Neil Wigan OBE, High Commissioner to Kenya, commended this stride, emphasizing the commitment to collaborate with Kenya in delivering reliable power for sustainable economic growth, all achieved through green energy to safeguard the interests of future generations. This collaboration signifies a shared vision between the UK and Kenya.

Wigan stated, “Powering economies requires power for people,” underscoring the project’s significance in advancing both economic development and environmental sustainability.

This initiative is part of several projects undertaken by R2RS across Africa, including an €80 million Egyptian wastewater project and a €37 million water sanitation project in Senegal. R2RS has unlocked a total finance amount exceeding $400 million for projects in Tunisia, Benin, and Mauritius.

Room to Run Sovereign (R2RS) is an innovative risk-sharing transaction introduced at COP26 in November 2021. Designed as a balance sheet optimization transaction, it enhances the African Development Bank Group’s commitments to climate finance by up to $2 billion, supporting African countries in meeting their Nationally Determined Contributions (NDCs) for climate action.

An image of the powerlines…source @MichaelGettschal

The 2023 approval of the Transmission Network Improvement Project aligns with ongoing efforts by the UK Government to address transmission network limitations, electricity supply reliability, and quality issues in Kenya. The project’s support, amounting to $59 million of the $116 million total project cost, corresponds to the climate mitigation component of the loan, made possible through additional capital unlocked by the UK Government guarantee.

Kevin Kariuki, Vice-President for Power, Energy, Climate, and Green Growth at the African Development Bank, highlights the collaboration with the UK as part of a broader initiative envisioning multiple projects in the Bank’s lending program.

This initiative responds to stakeholders’ calls at COP27 for Multilateral Development Banks to innovate and scale up climate finance.R2RS, accompanied by a conviction in the necessity for scaled actions in adaptation and mitigation, has been instrumental in rolling out projects such as the €80 million Egyptian wastewater project and a €37 million water sanitation project in Senegal in May of the previous year.

Under R2RS, a $2 billion guarantee is provided to the Bank by the UK Government ($1.6 billion in cover) and City of London insurers ($400 million). By assuming a portion of the credit exposure on a segment of the Bank’s sovereign portfolio, R2RS enables the Bank to provide up to an additional $2 billion of climate finance to Africa by 2027, split between adaptation and mitigation.

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