Cameroon Secures CFA35 Billion to Restore Guarantee for Nachtigal Hydropower Project

Cameroon has made significant progress in restoring the financial guarantee backing the Nachtigal hydropower project, although the operation has yet to be completed.

According to information obtained by Investir au Cameroun from sources familiar with the matter, the government has already secured CFA35 billion to replenish the standby letter of credit (SBLC) issued by SCB Cameroun.

The financing operation, launched in March 2026 and arranged by Financia Capital, aims to fully restore the euro-denominated guarantee, valued at more than €86 million, or about CFA56 billion. The amount raised so far represents just over 62% of the target, leaving approximately CFA21 billion still to be secured.

The SBLC is a key component of the financial structure supporting the Nachtigal project. It guarantees payments owed to Nachtigal Hydro Power Company (NHPC), the company operating the hydropower plant, if the electricity buyer fails to meet its payment obligations. Since the government took control of former utility Eneo, now renamed Socadel, it has sought to reduce the risk of payment defaults on the strategic project, which has become a cornerstone of Cameroon’s electricity supply.

Financing Progresses, but Talks Continue

According to a source involved in the negotiations, the financing package has not yet been finalized. “The commitments received from banks now cover the full amount being sought. However, discussions are continuing on the financial terms, the loan structure, and the required guarantees. Once those issues are resolved, the proposals will be submitted to the banks’ credit committees before the financing agreement is signed,” the source said.

That means the government has already secured an initial financial buffer, but completing the guarantee still depends on final negotiations over lending conditions, collateral requirements, and internal approval processes at participating banks.

According to the same sources, the partial replenishment of the SBLC, combined with partial payments on nearly CFA70 billion owed to NHPC as of February 2026, has helped ease pressure on the project’s broader guarantee framework, including a World Bank-backed guarantee supporting Société Générale Paris.

At the same time, the government has established a revolving fund designed to gradually rebuild the reserve and reduce the risk of future payment defaults. The mechanism is intended to secure payments to NHPC as the Nachtigal plant takes on a growing role in the country’s electricity generation.

A Test Case for Future Energy Projects

Beyond the immediate financing needs, the Nachtigal project highlights broader questions about how Cameroon manages the financial commitments associated with large public-private partnerships.

As public guarantees, counter-guarantees, and other risk-sharing mechanisms become more common in major energy projects, the government is paying closer attention to the fiscal risks they create. Nachtigal illustrates how even a strategically important infrastructure project can become a financial challenge when the electricity purchaser is unable to meet its payment obligations consistently.

The Ministry of Finance has already acknowledged those concerns. “We need to become much better at structuring the financing of major projects. The NHPC case has provided valuable lessons that are shaping our thinking today. We believe the financial structure of this project did not leave the state in the strongest possible position,” a ministry official said during the second International Financial Conference held in Yaoundé on April 23.

The concerns echo those raised by the International Monetary Fund. In its 2025 report on the seventh review of Cameroon’s economic and financial program, the IMF warned that costs associated with operating the Nachtigal power plant could place additional pressure on public finances.

As Cameroon prepares other major energy investments, including the planned Kikot hydropower dam, Nachtigal is increasingly being viewed as a case study. The project remains critical to expanding the country’s electricity supply, but its financing structure also underscores that the success of large infrastructure projects depends not only on megawatts generated, but also on the state’s ability to sustain contractual commitments, public guarantees, and payment flows over the long term.

Amina Malloum