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Madagascar: PPP hydro project between e7 and GTZ

The Lokoho Hydro Project is a public-private partnership (PPP) between GTZ, the private partners e7 (an institution set up by the world's largest electric utility companies) and Electricité de Madagascar (EDM). The project aims at integrating electricity generated by a newly constructed 4 MW hydro power plant into a comprehensive rural development approach. The electricity it provides enables productive economic processes and creates income for the rural population.
Context
 
Inexpensive and reliable access to energy is an essential precondition for the social and economic development of a country. Electricity is especially suited to encourage productive economic processes and generate added value. In rural areas electrification improves the living conditions of the local population by creating employment opportunities, slowing down migration into the cities and mitigating environmental degradation.

In Madagascar currently only one third of its 17.5 million inhabitants have access to electrical energy. However, these figures mainly apply to urban areas - in rural areas the electrification rate is even lower at 3%. Therefore, the Malagasy government has declared rural electrification as a national priority. In order to achieve this aim, government strategies focus on private-sector engagement and foreign investment, as the national utility Jiro sy Rano Malagasy (JIRAMA) does not possess sufficient financial resources.

Madagascar offers excellent possibilities for the utilisation of hydro power, which at present constitutes the main source of electricity generation in the country. Nevertheless, a large potential for hydro power still remains unexplored. The hydro power potential would be sufficient to significantly increase the electrification rate and substitute the expensive diesel-fuelled power plants that generate the remaining share of the electricity. In this context, the Malagasy government as well as international organizations favour small scale hydro power plants with the participation of private investors and operators.

The Lokoho project is a public-private partnership (PPP) between GTZ and the private partners e7 and Electricité de Madagascar (EDM). The project aims at integrating electricity generated by a newly constructed small-scale hydro power plant into a comprehensive approach of rural development.
 

Objective

Energy from the Lokoho small-scale hydro power plant promotes rural development in north-eastern Madagascar. The provided electricity enables productive economic processes and creates income for the rural population.

The growth of rural incomes leads to an increase in energy demand and ultimately to an increase in profitability for the involved private utilities.
 

Approach
 
e7, an institution set up by the world’s largest electric utility companies, is responsible for the construction of a small-scale hydro power plant on the Lokoho river in north-eastern Madagascar as well as for the construction of the transmission lines. For these purposes, the e7 member Electricité de France (EDF) engages in a business relationship with the private Malagasy utility Electricité de Madagascar (EDM). Both enterprises set up one company for the operation of the power plant and another company for the distribution of energy in the rural areas.

The generated electricity is sold in part to the national utility JIRAMA for distribution in the two urban centers of Andapa and Sambava. Thereby, JIRAMA is able to substitute the expensive, environmentally damaging and very unreliable electricity from diesel generators.

The remaining electricity is used for the electrification of 30 villages in the areas sourrounding the two towns and the power plant. GTZ supports the people in these villages to seize the opportunities created through the provision of electricity, thereby assisting them to generate additional income. To this end, GTZ provides technical assistance in the form of market analyses, concepts for the productive use of energy, financing services, vocational training and additional aspects such as the maintainance of the transport infrastructure.

The Lokoho project was developed in close cooperation with the Growing Sustainable Business (GSB) initiative, which is coordinated by the United Nations Development Programme (UNDP). The GSB Coordinating Group in Madagascar provides a platform for partnerships of private enterprises with the government, NGOs and international organisations. Furthermore, GTZ is closely coordinating its activities with other donors (World Bank, European Union, African Development Bank) as well as national and international development agencies (Agence de Développement de l’Electrification Rurale (ADER), Fonds d'Intervention pour le Développement) that are active in the project region.
 

Results

The electrification of rural areas in north-eastern Madagascar in combination with the promotion of productive use of energy contributes to the economic and social development of the project region. In addition, 16 000 households or approximately 80 000 people in the rural areas will gain first-time access to modern and affordable power supply.

In the two towns of Andapa and Sambava up to 50 000 people and a multitude of local enterprises will benefit from the cheaper and more reliable electricity supply. Moreover, the substitution of diesel with electricity decreases production costs for the national utility and thus also the energy expenditures of households and enterprises.

As hydro power constitutes a relatively cost-effective option for rural electrification, the project can serve as a blueprint for similar future projects in Madagascar or other developing countries. UNDP and the Global Environment Facility (GEF) are already planning a project that will build on and replicate the Lokoho approach in order to create an enabling investment climate for small hydro power in Madagascar.
 
 


Additional information: GTZ web site
News date: 01/07/2006


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