Washington, D.C., and Reykjavik, Iceland,
July 1, 2008—IFC, a member of the World Bank Group, and Reykjavik
Energy Invest have signed an agreement for joint exploration and development
of geothermal resources in Djibouti that will help address the country’s
power shortage and reduce carbon emissions. This is the first project to
be funded by IFC InfraVentures, a new $100 million fund that will help
develop infrastructure in the world’s poorest countries.
IFC InfraVentures addresses major constraints to private investment in
infrastructure projects, including a lack of funds and experienced professionals.
It will provide early stage risk capital, feasibility studies, and support
on developing financial models and project structures that are commercially
viable and able to more rapidly complete financing.
For the Djibouti project, IFC InfraVentures will provide 35 percent of
the exploration costs, including full feasibility studies and exploration
drilling for the geothermal plant. IFC InfraVentures’ contribution is
capped at $4 million. IFC InfraVentures will also work with Reykjavik Energy
Invest to implement environmental and social standards and mobilize financing
from other investors. The two organizations are assembling a consortium
of project participants to secure additional funds.
A lack of a reliable, secure, and low-cost energy supply is a key barrier
to Djibouti’s business development, and demand will continue growing rapidly.
IFC InfraVentures’ investment will help produce at least 50 megawatts
of additional power to address demand. The project will help reduce carbon
emissions by using geothermal generation as an alternative to diesel power.
Hjorleifur Kvaran, Chief Executive Officer of Reykjavik Energy Invest,
said, “There is a huge opportunity for geothermal power production in
Djibouti. We are assembling a consortium of investors, and IFC is our first
partner. We are very happy that, through IFC InfraVentures, the World Bank
Group is dedicating funds for the project. This is an important step in
securing financing and minimizing our financial risk.”
Reykjavik Energy Invest has an agreement with Djibouti’s government to
help replace diesel-generated electricity with more environmentally friendly
Rashad Kaldany, IFC Vice President for the Middle East, North Africa, and
Infrastructure, said, “This first transaction for IFC InfraVentures is
moving an innovative approach forward. A successful feasibility study for
REI Djibouti, one of the first large-scale geothermal projects in Africa,
will show the viability of geothermal as a major contributor to the region’s
growing energy needs. We look forward to a long-term partnership with REI.”
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 is the international business development and investment
arm of Reykjavik Energy. The company focuses on creating partnerships to
develop geothermal areas. It invests in geothermal exploitation rights;
develops, builds, and operates geothermal fields; and seeks to acquire
operating geothermal plants.
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. For more information, visit www.rei.is