Funding Strategy

Exploring all potential sources of funding. Given the high amount of funding still required, the Rural Energy Master Plan shall explore all possible funding sources, giving always priority to those that generate smaller yearly costs (with lower interest rates and higher maturities).

Country related funding

Development Assistance. Although Liberia is sometimes seen as a very high ODA recipient country on a GDP basis (the first in Sub-Saharan Africa) such fact derives not so much from the level of ODA received but from the very low income of the country – due to one of the most severe and long-lasting civil wars in Africa and, most recently, due to the Ebola outbreak. Considering ODA total value, on average between 2006 and 2014, Liberia was only the 22nd Sub-Saharan African country in terms of ODA received.


Maintaining energy sector as ODA priority may generate funding in excess of USD 474M. ODA has been and is expected to continue being the main source of funding for the needed infra-structure on roads, energy and communications. ODA statistics show that Liberia allocated on average 10.5% of its total ODA received between 2006 and 2013 to the energy sector, much above West African countries average of 3.3%. Considering an intermediate allocation of future ODA to energy (6.9%) and a more balanced allocation of funding to rural energy vs. Monrovia electrification after 2020, ODA funding for rural energy could reach USD 474M until 2030. It could even be higher if priority to energy and rural areas is also higher.

Concessional loans with limited funding potential. While Liberia received on average 60% of its GDP as ODA every year since 2006, its total cumulated debt is currently around 41% of GDP – meaning that the total debt incurred over the last years is only a portion of the average ODA received each year and that additional debt will be dependent on GDP growth. If we consider IMF policy and limitations on Heavily Indebted Poor Countries (HIPC) and similar criteria to grants on the allocation of country available concessional loans between sectors and, for energy, between rural and Monrovia electrification, the estimated funding potential of concessional loans would be only USD 75M.

A compelling case for Grant and Concessional funding. The Master Plan benefits from a strong initial focus on the electrification of the main cities and towns outside Monrovia (65% of all rural clients in 2030) where there is business activity and some capacity to pay for energy services. The support studies show that if initial investments have a strong component of grants and if consumers are charged for what they consume based on pre-paid meters and reasonable tariffs, it is possible to create a financially sustainable system that can maintain the assets, pay for running costs and fund a part of the growth investments… potentially leveraging on a robust Rural Energy Fund to mitigate risks and reduce interests.

Project related funding

Free Cash Flow analysis. This Figure shows a simulation of the rural energy sector cash flows on an intermediate year (half of 2030). The potential power sector revenues have been estimated considering demand and an electricity price, inclusive of GST, of 0.35 USD/kWh. The revenues are discounted of the operational expenditures (OPEX) associated with generation, transmission and distribution of power consumed and lost. On an intermediate year the Power Sector could generate USD 50M of Free Cash Flow. However, with commercial loans and private sector equity required returns such Free Cash Flow would only allow for the repayment of approximately one third of the USD 935M required. This means running costs can be paid by the Power Sector at reasonable prices and some funding could be raised by the Sector, but majority of energy infra-structure investment or CAPEX in rural Liberia needs a significant level of Grants and external support.


USD 303M Funding potential mostly on the National Grid. The Free Cash Flow Analysis also shows that around 85% of the Free Cash Flow generated would come from the National Grid where generation cost is lower due to regional imports and large scale hydro investments. This offers the potential to have On-grid Renewables and part of the National Grid Distribution investments around Monrovia and the Growth Corridor funded by Development Finance Institutions together with Regional Distribution Companies or Independent Power Producers. An estimated funding of USD 303M could be raised coming from DFI (USD 232M) and Private Sector (USD 71M).

Tariff structure. Demand can have a relevant impact on Free Cash Flow if tariff structure is based only on average costs. Generation units have different marginal costs. As tariffs go below the price of diesel most of the self-generated consumption in National Grid is expected to connect into the grid creating a sudden increase in demand that will require response from expensive backup generation or result in blackouts. The same phenomena tends to happen is smaller Solar/Diesel mini-grids where consumption growth requires more diesel and the response tends to be the reduction in the number of hours of service. Power sector sustainability requires a progressive tariff structure that increases to marginal cost as consumption approaches the available generation capacity.

Funding sources summary and other funding

Funding summary. The following graph summarizes the potential of the different sources of funding towards the required USD 935M investment (around USD 60M/year). Grants and ODA funding will be the key source of funding. On-Grid renewables and part of the National Grid investments will be funded mostly by DFI – representing the second largest contribution to funding the Master Plan. Concessional loans and commercial lending or equity will have a smaller but still relevant role.


Need for other funding. An additional USD 83M funding is required to reach the USD 935M. The Master Plan proposes the creation of a Power and Petrol Contribution and of Lease Fees that can be directed to REFUND and leveraged with financial institutions to obtain the missing USD 83M.