The contract involves the construction, with financing from Italy’s credit agency Servizi Assicuative de Commerce Estero, of the 2,200-MW Koysha Dam on the Omo River in the southern part of the country.
Salini currently is constructing Ethiopia’s 6,000-MW Grand Ethiopian Renaissance Dam, which, when commissioned in 2017, will be Africa’s largest and the world's No. 11 largest hydropower project. The Italian construction firm last year completed the 1,870-MW Gibe III hydroelectric power project at a cost of $1.6 billion.
The new Koysha hydropower project will have a 170-meter-high rolled compacted concrete dam, with a 6-billion-cu-m-capacity reservoir. The plant will generate an estimated 6,460 GWh of electricity annually.
“The project, together with Gibe III and Grand Ethiopian Renaissance Dam on the Blue Nile, will enable Ethiopia to become Africa’s leader in energy production,” a statement from Salini said in May.
Ethiopia, which has an existing generation capacity of 2,145 MW, nearly 200% more than the capacity it had in 2008, is still implementing the first phase of the 20-year Growth and Transformation Plan (GTP). That plan also involves the completion of the $4.1-billion Grand Ethiopian Renaissance Dam and the Gibe III project. While the GTP plan was forecast to increase the country’s generating capacity to 10,000 MW from 2,400 MW by the end of last year, only Gibe III has been completed. Under phase two of the plan, Ethiopia has approved construction of energy projects with a combined capacity of 12,000 MW by 2020. The GTP has the potential to “help sustain Ethiopia’s continued economic growth and enable it to become a regional renewable-energy hub in East Africa,” said the U.S. Agency for International Development in March.
Ethiopian government reports estimate the country’s electricity generation potential at 60,000 MW from diverse renewable sources, such as hydroelectric, wind, solar and geothermal.
Ethiopian Electric Power Corp. estimates that the GTP energy-sector plan could cost the country $25 billion by 2020.
“For this ambitious energy plant, the idea is to finance at least 50% from our own coffers, the Ethiopian government, while the rest will come from other sources, which could be grants, soft loans and commercial loans from foreign banks,” said EEPC Chief Executive Officer Azeb Asnake in a previous interview with Reuters.
Despite the ambitious new energy-generation plans, Ethiopia faces numerous challenges in achieving its electricity-expansion targets. A USAID report earlier this year noted the challenges: rehabilitating "an aged distribution system with high losses, ensuring more efficient operation and maintenance of the expanded system, becoming a creditworthy purchaser of electricity from independent power producers, addressing foreign exchange constraints, reforming tariffs to allow for full-cost recovery, and delivering more power to the majority of the population living off the grid."
U.S. President Barack Obama’s Power Africa initiative is offering Ethiopia technical assistance on its energy-expansion program in partnership with Sweden, Norway, the World Bank, the European Commission, the United Nations, the United Kingdom's Dept. for International Development, and other development partners. Together, these partners are helping to further new laws and regulations to woo private-sector investments in independent power purchasers' renewable-energy projects.
The Power Africa initiative also is helping Ethiopia to negotiate and bring to a financial close the initial landmark IPP for the Corbetti and Tulu Moye geothermal projects, which have a combined generating capacity of 1,000 MW, according to a recent review by USAID.
Regarding the country's power-sector plan, Power Africa also is helping Ethiopia with its transition to competitive tendering; the planning, operation and maintenance of the generation, transmission and distribution systems; developing a grid code that specifies the rules and responsibilities for all energy stakeholders; creating a plan to reduce distribution losses and assist with the introduction of smart-grid technology, and “strengthening the Ethiopian Electricity Authority to perform as an effective regulator and assist with determining cost-reflective tariff rates,” the agency said.