FINANCING FOR REA PROJECTS

The Rural Electrification Program has been made possible using various financing sources including the Consolidated fund, a levy on energy sales by generation companies to UETCL, bilateral partners especially SIDA and JICA and other multinational partners, notably the World Bank through it's Energy for Rural Transformation (ERT) program and the African Development Bank (urban power Rehabilitation Project) In order to rationalize the program and implement it to sequence projects on value for money basis (economic, social and financial) as well as achieving regional equity, it was necessary to develop a Rural Electrification Master Plan. With completion the master plan (2008), projects are being selected on a criterion based on a combination of the following factors:

Least cost (lowest tariff) lines -i.e. value for money projects;
Regional distribution to achieve equity, with projects in a given region competing against each other on least cost basis;
Connection to district headquarters, to facilitate good governance while, maximizing the capture of key economic activities (e.g trading centres and SMEs) and social services (health care, educational institutions and water supply) along the way;
Connection to large rural industrial activities (e.g tea, coffee, fish and mineral processing);
Presidential pledges and manifesto schemes: there are over 200 schemes that have been implemented and commissioned under this scheme. Another 114 schemes have been either partially implemented or surveyed but currently have no funds to complete them


Each year, there will be a package (or packages) of projects, known as Priority Rural Electrification Projects (PREPs) to be marketed to various financing agencies or to be directly financed from the Consolidated Fund of Government. The implementation of PREPs, including construction and the procurement of network operators, is carried out according to the following procedure:


REA identifies priority rural electrification projects (PREPs) using the Rural Electrification Master Plan. During the identification, REA prequalifies those projects which stand out as possible axes (or nuclei) for new concessions on the basis of size and potential demand. The others are earmarked for assigning to the adjacent grid operator, e.g. UMEME Feasibility studies and environmental impact assessments are conducted. Demand projections are used to confirm potential candidates for concessions. REA procures contractors in line with international (donor) or national procurement guidelines Contracts are awarded to winning bidders, who proceed to execute and commission the projects REA, working closely with the Electricity Regulatory authority (ERA), procures private sector operators on a 10-year lease (or concession) to manage and run the new networks. ERA issues a license to the procured operator The winning bidder signs a lease agreement with the Rural Electrification Board