The Hydroelectric Inga III Project of the DRC

What Opportunities Exist for Inga III Considering the Current State of the
Project and the DRC

9AAE-14
November 2015
Contents

Section Slide Number

Executive Summary 3

Introduction 8

Country Overview 15

Project Analysis 20

Project Drivers and Restraints 25

DRC—Power Sector Current Infrastructure Analysis 36

Legislative Environment 42

Key Participants 46

Investment Opportunities 52

The Frost & Sullivan Story 64

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Key Findings

• The Inga III Basse Chute is the next development on the Congo River and aims to produce
MW of green energy. The off-takers of this power is South Africa, the mining regions
of the Democratic Republic of Congo (DRC) and the capital Kinshasa.
• The rehabilitation of Inga I and Inga II is currently ongoing and continues to experience
power interruptions.
• The Inga III project has been delayed several times, the last being due to the World Bank
barring several contenders for the consortium. The project start date has been pushed to
2017 (it was previously 2015).
• Despite historical evidence of corruption and maladministration, several development and
financial institutions are contributing finances and expertise to the project.
• The government of the DRC has several bodies in place that regulate the process of foreign
investment and harmonise business law throughout Africa.
• Export markets stand to be economically improved through increased electrification of trade
and industry sectors such as South Africa.
• There are opportunities for international equipment suppliers and engineering, procurement,
and construction firms to be involved in the project as local expertise is insufficient.
• Supporting industries offering consultancy and advisory services will be required as the
development of the project begins to gain traction. Source: Frost & Sullivan

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Project Overview

• Inga III BC is the next phase in the Inga site

development with a MW capacity.

• The project involves a diversion of part of the Congo

River into the Bundi tributary. Transfer
Canal
• The construction of Inga III requires:

o Intake of the Congo River.

o km transfer canal.

o m high roller-compacted concrete dam. Inga 1

o Hydropower station consisting of units with an

installed capacity of MW. Inga Inga 2
III BC

o Transmission lines of km connecting Kinshasa

and the DRC’s border via Kolwezi to the power
source. Image Source: World Bank

Source: World Bank; Frost & Sullivan

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 Project Economic Analysis

• The viability of such a project is dependent on key Customers Willingness to Pay, DRC, 2013
economic indicators based on a consumer surplus
methodology. Each class of beneficiaries were Willingness to Pay
assessed, including SNEL, Katanga mines, and the Customer Group (US cents/kWh)
SAPP region. SNEL
• The duration of the project is shown below, which Katanga mines
predicts the duration of both construction and
operation. It will take 6 years to complete common SAPP region
infrastructure and 5 years to complete the
transmission lines.

Construction Years Operational and Maintenance Years

1 2 3 4 5 6 7 8 9 10 11

Life span: 35 years

Common Infrastructure: $ Billion Common Infrastructure: % of $ Billion investment

Power house: $ Billion Power house: % of $ Billion investment
Transmission lines: $ Billion Transmission lines: % of $ Billion investment
Source: World Bank; Frost & Sullivan

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 Project Structuring

• The estimated costs of the Inga III BC development and associated local and international transmission
lines is $14 Billion, which includes financing cost.
• The Government of the DRC (GoDRC) has opted to develop the Inga III BC as a Public Private
Partnership (PPP), easing public debt. It is institutionally structured as follows:
Total Project Cost Split, DRC, 2013

Transmission line through SAPP Power Station*

• Developed by the SAPP • Developed, designed, financed,
countries under the leadership of T-line Zambia- constructed, and operated by
South Africa either by: SAPP
% Power Plant private consortium under a
o The reinforcement of existing % concession contract
SAPP system
T-Line DRC-
o A mix of reinforcement and new Zambia
direct current (DC) line directly %
in South Africa Common • Financed by public entity
• Developed, designed, financed,
Infrastructure contracting out works to one or
%
constructed, and operated by private more engineering, procurement,
consortium under a concession and construction contractors via
contract bidding rounds
Transmission line through DRC* Intake, Canal, Dam

*Operated by a single Special Purpose Vehicle (SPV) Source: World Bank; Frost & Sullivan

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Research Methodology

• This research is based on in-depth secondary knowledge found from multiple sources, and caution was
taken to consider relevant secondary sources that were not more than years old. In certain instances
where data and information was not updated, older sources were consulted and indicated in the
document as such. Where possible, information from said older sources were adapted to current
conditions, with assumptions provided.
• Primary research was conducted in the form of phone interviews with companies that are closely
involved in the Inga project such as government officials and top management.
• A base year of 2013 was chosen, as this is the most recent year where a full set of data was available.
• Companies that were contacted during primary research include the World Bank, African Development
Bank, and International Rivers.

Image Source: International Rivers

Source: Frost & Sullivan

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Motivation and Objectives of Analysis

Africa, an area rich in natural resources, has consistently suffered from a lack of expertise in
exploiting these resources, specifically for power generation.

An estimated % of Sub-Saharan Africa have access to electricity, which leaves

Million people without energy access.

In 2014, Africa was home to % of the world’s population but only generated % of
globe’s total electricity production.

The DRC has long been identified as having a massive resource of hydropower in the
iconic Congo River and it currently makes up % of the energy generation for the
country. The river is known to possess MW of attainable energy.

The Inga Hydroelectric Project (I, II, III, and Grand Inga) has the opportunity to
connect Africa’s power pools and help build an electrified continent. Inga I and II were
completed in 1972 and 1982, respectively, and have a combined installed generation
capacity of MW.

Source: Frost & Sullivan

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Motivation and Objectives of Analysis (continued)

Objectives—This study provides analysis into the opportunities that a new hydroelectric dam
in the DRC will provide over the next decade by considering:

The current state of the DRC power industry.

The drivers and restraints of the project.

The key participants in the project.

Legislative environment and investment opportunities.

Source: Frost & Sullivan

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Scope of Research

This research scope focuses on the opportunities that the Inga III Basse Chute (BC) will provide by
analysing:

The political, economic, and social environment in the DRC.

The impact of the drivers and restraints of the project.

The current generation, transmission and distribution capacity controlled by

Société Nationale d’Electricité (SNEL).

The key participants in the power industry.

The investment opportunities that arise from expansion in energy generation and
transmission, rural electrification, the export market, equipment suppliers, and
maintenance and overhaul.

Support services, as well investment risks and incentives.

Source: Frost & Sullivan

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Geographical Scope

The Inga III has been planned in 2 phases, Inga

III Basse Chute (BC) and Inga III Haute Chute
(HC). BC will be a low wall and construction is
set to begin in 2017. The wall will later be raised,
termed HC*. The date of HC will be determined
by the success of BC.
.
This research is focused on the Democratic Inga III Basse Chute
Republic of Congo, which is the eleventh largest
country in the world. The DRC shares a border
with Central African Republic, Republic of Congo,
Angola, Zambia, Rwanda, Burundi, Uganda,
South Sudan, and shares Lake Tanganyika with
Tanzania.
Image Source: CIA

*Inga III Haute Chute is also commonly referred to as Grand Inga

Source: Frost & Sullivan

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