Guide to developing and investing in the somaliland power sector


The USAID-funded Power Africa East Africa Energy Program
(EAEP) has developed this guide for potential investors in
Somaliland’s power generation sector. The guide will also be of
interest to current electricity service providers (ESPs) and other
power sector stakeholders in Somaliland, because it considers
solutions to gaps in the current enabling environment specifc to
power contracting.

Somaliland’s power sector has evolved and developed rapidly
following the cessation of a civil war in 1991. The rebuilding of the
power sector has resulted in privately owned ESPs building and
consolidating distribution power systems for large urban centers.
There is no power transmission system in Somaliland, and population centers are serviced by a mix of diesel power generators with some solar and battery energy storage. Somaliland’s power sector has reached a major transition point and requires increased capital to further develop. To facilitate this development, more independent power producers (IPPs), investors, and technology providers need to become involved.

The power sector’s enabling environment is still relatively
underdeveloped. While Somaliland’s constitution and overarching
legislation supports and encourages power development and foreign investment, the Somaliland administration is still finalizing certain key policies and legislation and has yet to develop all necessary regulations. Despite gaps in Somaliland’s enabling environment, developers and investors can take pragmatic measures to manage risks through special arrangements and agreements with local partners, the Somaliland administration, and of-takers. This guide is primarily intended for potential developers in the Somaliland power generation sector, although the insights, risk
assessments, and opportunities identifed will be of interest to
any party with an interest in investing in projects (e.g., investors,
lenders, development fnance institutions, risk insurers, and project
advisors). The guide also will also help existing Somaliland power
sector stakeholders (e.g., the administration and ESPs) to understand what developers need to invest in and how those needs could be addressed. The guide includes the following sections:

Overview of Somaliland’s power sector

• Assessment of the power sector’s current state of
readiness for development

• Gap analysis comparing what investors and developers
require against the power sector’s current investment

• Alternative measures to address perceived gaps in the

• Practical checklist of recommendations
This guide recommends that power developers initiate workarounds for each bankable project to facilitate a contracting environment
favorable to all stakeholders. Through these workarounds, all parties can adopt a fexible and pragmatic approach, which leads to better
outcomes and enables power project developments to proceed.