The Board of Directors of the African Development Bank Group (AfDB) has approved two grants to the tune of US$83.6 million to boost cross-border electricity trade between Ethiopia and Djibouti.

According to the Bank Group, this grant will help deepen integration in the Horn of Africa sub-region. The funds are made up of a US$69.65 million grant to Ethiopia and a second grant of US$13.93 million to Djibouti, both sourced from the African Development Fund which is the African Development Bank’s concessional financing window.

Also, the Ethiopia-Djibouti Second Power Interconnection project will entail the construction of nearly 300 km of interconnector line, 170 km of transmission lines, and new construction or renovation of substations in the two countries.

The Expression of Interest (EoI) for financing presented by the Federal Democratic Republic of Ethiopia and the Government of the Republic of Djibouti earlier this year included the construction of 102km of 230 kV double circuit transmission line from Semera in Ethiopia to Galafi (Djibouti Border. It also involved a 190km of 230 kV double circuit transmission line from Galafi to Nagad in Djibouti among others.

The request for financing, according to the Bank Group was intended to be used partly for the payments of goods, works, related services and consulting services to be procured under the project.

In a recent publication released by the Bank Group, the main objectives of the project is to increase power trade between the two countries lead to improved and clean electricity access in Djibouti at affordable prices. And also lead to exchange earnings for Ethiopia.

Building on the first phase of the power interconnection line

Mr. Batchi Baldeh, the Bank’s Director of Power Systems Development remarked that:

“The first interconnection line is reaching its power transfer capacity limit due to several developments in both countries, such as the industrial development in the eastern part of Ethiopia, the railway line from Djibouti to Ethiopia (powered by electricity), and the port expansion in Djibouti.

“The two countries have thus decided to develop the second power interconnection line to maintain energy security and reliability for Djibouti”

By the time the project is completed, it is expected to increase Ethiopia’s power export revenue. This will also help in boosting Djibouti’s access to reliable and affordable clean electricity, lowering costs to below $0.10 per kWh.

Moreover, other expected impacts in Djibouti include a more enabling and conducive environment for businesses and job creation for youth, as well as lower greenhouse gas emissions.

Furthermore, nearly two decades ago, in 2004, the African Development Bank Group financed the first power interconnection project between the two countries.

This second project is expected to build on benefits achieved over the last ten years, including a 65 per cent increase in customer connections in Djibouti. Also, it includes a sharp reduction in the use of thermal generation plants from 100 per cent to around 16 per cent. That said, Ethiopia has earned US$275 million in revenue from power exports over the last ten years.

The press statement indicated that the project is aligned with the Bank’s East African Regional Integration Strategy Paper, which seeks to promote regional infrastructure for economic transformation.