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Reykjavik Energy Invest Washington, DC, and Reykjavik, Iceland-July 1, 2008-IFC, a member of the World Bank Group, and Reykjavik Energy Invest (REI) have signed an agreement for the joint exploration and subsequent development of geothermal resources in Djibouti. The agreement is the first funded by IFC InfraVentures, a new $100 million fund that will support development of infrastructure in the world's poorest countries.
IFC InfraVentures addresses the lack of sufficient funds and experienced professionals dedicated to the development of infrastructure projects, one of the major constraints to private investment in infrastructure projects. It will provide early stage risk capital, fund feasibility studies, and support on developing financial models and project structures that are commercially viable and able to more rapidly complete financing.
As co-developer with REI, IFC InfraVentures will provide 35 percent of the exploration costs of the project, including full feasibility studies and exploration drilling for the geothermal plant. IFC InfraVentures will also work with REI to implement robust environmental and social standards and mobilize financing from other potential investors. REI and IFC InfraVentures are currently assembling a consortium of project participants to secure additional funds. IFC InfraVenture's contribution is capped at $4 million.
The lack of a reliable, secure, and low-cost energy supply in Djibouti is a key barrier to the development of industry and commerce, and demand is expected to grow dramatically in the near term. In addition to addressing the current shortage in available power, the project will reduce the amount of carbon emissions from power production using geothermal generation as an alternative to diesel-generated power.
The Djibouti project is located in the geothermal area of Lake Assal, the lowest point in Africa at 157 meters below sea level. While the country has only 90MW of installed diesel electricity generation capacity, it is estimated to have up to 800MW of geothermal potential. IFC InfaVentures expects this investment, its first in Djibouti, to result in the production of at least 50MW of additional power to address the rapid expected growth in demand for electricity. REI has an agreement with Djibouti's government to help the country replace its current diesel-generated electricity with environmentally-friendly electricity. The agreements were announced at the World Energy Summit held in Abu Dhabi earlier this year.
Comments: Mr Rashad Kaldany (Director for Infrastructure): IFC "This first transaction for IFC Infraventures is important to moving this innovative approach forward. A successful feasibility study for REI Djibouti, one of the first large-scale geothermal projects in the region, would have a significant impact by proving the viability of geothermal energy as a major contributor to the region's growing energy needs. We look forward to a successful partnership with REI, building on our complementary skills."
Mr Hjorleifur Kvaran (Chief Executive Officer) Reykjavik Energy Invest "We believe there is a substantial opportunity for geothermal power production in Djibouti. We are assembling a consortium of investors to support the projects and IFC is the first partner that we announce. We are very happy that the World Bank's IFC is dedicating funds for the project.This is an important step in securing financing and minimizing REI's financial risk."
About IFC IFC, a member of the World Bank Group, fosters sustainable economic growth in developing countries by financing private sector investment, mobilizing private capital in local and international financial markets, and providing advisory and risk mitigation services to businesses and governments. IFC's vision is that poor people should have the opportunity to escape poverty and improve their lives. In FY07, IFC committed $8.2 billion and mobilized an additional $3.9 billion through syndications and structured finance for 299 investments in 69 developing countries. IFC also provided advisory services in 97 countries. For more information, visit www.ifc.org.
About Reykjavik Energy Invest
Reykjavik Energy Invest (REI) (www.rei.is / info@rei.is) is the Reykjavik Energy (Orkuveita Reykjavikur www.or.is) international business development and investment arm. Reykjavik Energy Invest focuses on creating partnerships to develop geothermal areas. The company invests in geothermal exploitation rights; develops, constructs and operates geothermal fields; and seeks to acquire geothermal plants currently in operation. Reykjavik Energy is the world's leading authority in the utilization of geothermal energy. Over the past 60 years, the company has consolidated its leadership by supplying a large portion of the Icelandic population with geothermal water for domestic heating and by gradually developing new steam fields for power production. ###
Contacts
IFC In Washington Zibu Sibanda Ph: +1 202-473-0605 E-mail: zsibanda@ifc.org
Reykjavik Energy Invest In Iceland Helgi Pétursson Ph: +354-617-6777 E-mail: helgi.petursson@or.is
In Johannesburg Houtan Bassiri Ph: +27 (11) 731-3179 E-mail: hbassiri@ifc.org
