GAP, Sources and Constrains

USD 935M investments for rural electrification. The graph shows a summary of the Rural Energy Master Plan investments per Program and type of investment (Generation, High Voltage Transmission, Distribution and other). The GTG and DG Programs represent around 90% of the total investment with significant investments both in generation and distribution. GTG Program by itself represents more than 50% of the Rural Energy Master Plan investments.


USD 749M still to be funded mostly for the period between 2020 and 2030. From the required USD 935M, around USD 140M are already committed and an additional USD 45M secured and not yet allocated, representing a total of USD 185M – mostly from African Development Bank, World Bank and European Union. Most of the secured funding will be deployed in the first phase, representing a significant part of the estimated investment of USD 262M. A gap of USD 746M remains to implement the Rural Energy Master Plan with additional USD 102M being required until 2020, USD 303M between 2020 and 2025 and USD 344M until 2030.


Potential sources of funding. Two main types of funding can respond to the USD 749M gap:

  • Country Funding: Funding by other countries or multilateral institutions which aim to support the development of Liberia. These include Official Development Assistance (ODA) Grants or Concessional Loans. Grants available for rural electrification are constrained by donors’ availability and preferences, and also by Liberia’s priorities and the need to share the available funds with other key sectors such as health, education or roads. Concessional loans are available for Least Developed Countries and have very low interest rates and very long maturities, but the available amount is limited by the country’s level of income, capacity to repay such debt and International Monetary Fund (IMF) policy on acceptable level of indebtedness.
  • Project related funding: Funding that can be repaid from cash flows generated from the investment. These include Development Finance, Commercial Finance and Equity – each with different requirements in terms of rate of return, tenor and ticket. Development Finance Institutions have been playing a major role in the financing of projects in the region. Potential depends on Free Cash Flows which are constrained by willingness and capacity of consumers to pay, by available generation alternatives and running costs and by capacity of Distribution Companies to avoid losses. Potential also depends on Risk - If debt repayment risk is high than less entities will be available to fund, the funding costs will be higher and less funding will be raised from the same cash flows.


Concessional finance and Project related funding trade-offs and constrains. Given the current situation of the Liberian power sector, the unpredictability of future rural demand and the financial situation of LEC it is difficult to expect, in the short term, lenders to be willing to fund energy sector investments without some kind of Government repayment guarantee. However, such public guarantee would reflect on the level of publicly guaranteed debt, thus limiting the country’s access to additional concessional loans with very attractive conditions. Preference will go to concessional loans and to the implementation of risk mitigation or credit enhancement mechanisms that allow Project related funding without jeopardizing concessional finance. The measures used include, among others: political risk insurances, comfort letters, escrow accounts and partial risk guarantees.