World Bank and Tunisian Government Sign Financing Agreement to Support Energy Sector Modernization
The World Bank and the Tunisian government have signed a financing agreement to support the modernization of the energy sector through the Programme d’amélioration de la fiabilité, de l’efficacité et de la gouvernance énergétiques tunisiennes (TEREG). With a budget of $430 million, including $30 million in concessional financing, this five-year program aims to support Tunisia in establishing a sustainable, reliable, and affordable electricity supply. It will contribute to accelerating the deployment of renewable energy, strengthening the performance of the Société tunisienne de l’électricité et du gaz (STEG), and improving the overall governance of the sector.
Alignment with the Government's Energy Transition Strategy
The TEREQ program is aligned with the government's updated energy transition strategy, aiming to strengthen the operational and financial performance of STEG, attract private investment, and reduce the carbon intensity of electricity production, while ensuring reliable access to electricity for households and businesses. It supports ambitious reforms to accelerate the deployment of renewable energy, improve energy efficiency, and modernize the entire electricity sector.
Supporting Tunisia's Development Goals
"By promoting the development of renewable energy, the TEREQ program will contribute to strengthening Tunisia's position in the field of clean energy, creating economic opportunities, and ensuring long-term energy security," said Alexandre Arrobbio, World Bank Operations Manager for Tunisia. "This project illustrates the solidity of our partnership with Tunisia and supports its sustainable development goals. It is part of our long-term commitment to the Tunisian energy sector and complements ongoing initiatives, such as the Tunisia-Italy Electricity Integration Project (ELMED), the Energy Sector Improvement Project, as well as the advisory services of the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA), in line with the Tunisia Partnership Framework and the country's commitments under the Paris Agreement."
Expected Outcomes
The TEREQ program is expected to enable Tunisia to progress towards its goals of mobilizing $2.8 billion in private investment for the addition of 2.8 gigawatts of new solar and wind capacity by 2028, generating over 30,000 jobs, mainly during the construction phase of renewable energy projects. It will also contribute to reducing electricity supply costs by 23%, improving STEG's cost recovery rate from 60% to 80%, and reducing subsidies by 2.045 billion dinars from the state budget.
First Project to Benefit from the World Bank's Financial Incentives Framework
"This is the first project to benefit from the World Bank's Financial Incentives Framework, a project that has been recognized for its scope and long-term benefits, in recognition of its impact on reducing greenhouse gas emissions," explained Amira Klibi, Senior Energy Specialist at the World Bank and Project Team Leader. "The reforms supported by the program, including the reduction of technical and commercial losses and the increase in the share of renewable energy, are expected to permanently improve the operational and financial performance of the sector, making electricity more affordable and reliable for households and businesses across the country."
