Elephants are stakeholders too

Building a new electrified standard-gauge railway (SGR) across the entirety of Tanzania in East Africa brings a wealth of opportunities as well as challenges along the way. EKN’s involvement and impeccable sustainability groundwork were instrumental in securing the participation of financial institutions in a project ultimately estimated at USD 10 billion.

The article at a glance

Tanzania’s new electrified standard-gauge railway (SGR) is a USD 10 billion infrastructure project designed to boost regional connectivity, trade and economic growth, while cutting travel time.
The project spans across urban, rural and protected areas, requiring extensive environmental and social measures, including biodiversity protection, community safety and resettlement management.
Lots 3 and 4 are financed by international lenders backed by five European ECAs, with EKN playing a leading role in both financing and sustainability due diligence.

Meeting global standards on local ground

Will the designated wildlife underpass be able to accommodate the largest male elephant in the herd? How do we ensure safety along the tracks when trains travel at a max speed of 160km/h for passenger trains rather than the 30 km/h of the previous narrow-gauge railway built over 100 years ago? Where can we relocate the colony of protected bats that have made an abandoned tunnel their home?

This is the most complex infrastructure project we have led in recent times

Yoshi Ichikawa, Managing Director and Head of Europe of Development & Agency Finance, Standard Chartered Bank

When planning a high-speed electrified railway across a landscape teeming with wildlife and human settlements, there is no shortage of challenges. “This is the most complex infrastructure project we have led in recent times,” admits Yoshi Ichikawa, Managing Director and Head of Europe of Development & Agency Finance at Standard Chartered Bank, Structuring Bank for the first four lots of the project.

His colleague, ESRM Director Ben Finn agrees it is a complex project from an environment and social perspective. “523 km of railway crossing urban as well as rural areas and numerous protected areas where biodiversity is an important issue. There is a lot of impact, which is not necessarily a problem, but the way it is understood and managed is the important thing.”

Completed in mid-2024, the first two lots of the railway have cut the travel time from the commercial hub and port of Dar es Salaam to the administrative capital Dodoma from eight to three hours. With over five million passengers so far and trains booked beyond capacity, the new railway has already begun to unlock significant economic opportunities, bolstering trade, enhancing tourism and supporting industrial growth throughout the region.

Construction of the track that constitutes lots 3 and 4 between Dodoma and Isaka via Tabora has commenced. The plan is ultimately to connect Uganda, Rwanda, Burundi and the DRC to Tanzania, providing them with access to the Indian Ocean.

Attracting lenders

The Lots 3&4 are financed by a cohort of international lenders, backed by a total of five European ECA’s, with EKN as one of the fronting agencies. There were efforts to involve Swedish exporters in Lots 3&4, with suppliers such as Alstom (signalling), Vossloh (switching), Epiroc (construction equipment) and Linxon (power supply technologies). This made possible to increase the EKN’s support amount for Lots 3&4 compared to that of Lots 1&2.

Thanks to the ECA backing, we could raise USD 1.3 billion with a 17-year tenor. We also had rigorous sustainability vetting under the lead of EKN.

The credit enhancement offered by the ECAs was instrumental in structuring long-term and competitive financing for the Tanzanian government to fund the strategically important project for the nation. “Thanks to the ECA backing, we could raise USD 1.3 billion with a 17-year tenor. We also had rigorous sustainability vetting under the lead of EKN,” says Ichikawa: “The comprehensiveness of the impeccable sustainability process was a foundation for attracting the participation of the international lenders. In addition to the financing terms and quality of ECAs’ support, international lenders want to understand the environmental and social impact of the projects they finance. In fact, a large-scale infrastructure project such as this one inevitably represents a full spectrum of environment and social matters to address.

He adds, “I am very proud of the fantastic job carried out over two years by the E&S team and the cohort of all ECAs. It made it possible for us to present to the lenders with a bulletproof package of the E&S due diligence report. “Thanks to collaboration with TRC and the Ministry of Finance of Tanzania, we managed to close as many as 58 environmental and social action plan items before getting ECA approval.”

Both EKN and Standard Chartered are extremely pleased to be part of the SGR project standing side-by-side with the Tanzanian government.

The comprehensive agenda of environmental and social issues that needed to be addressed includes community safety awareness and risk assessment training, resettlement issues and redress mechanisms, biodiversity, human rights, forest conservation, water management and general community impact – just to name a few. Most importantly, however, is to build and embed capacity for the national operator to be able to continue environmental and social management and monitoring once the project is constructed and operating.

Ichikawa concludes by saying: “EKN played a significant role in this transaction both from an E&S and a financial aspect. The fact that EKN was the first ECA to approve this transaction reflects that leadership. Both EKN and Standard Chartered are extremely pleased to be part of the SGR project standing side-by-side with the Tanzanian government.”