World Bank Funds $430M Energy Reform Program to Power Tunisia’s Green Future

The TEREG project is the first initiative globally to benefit from the World Bank’s new Framework for Financial Incentives, which rewards programs that demonstrate long-term climate and development impact.

In a landmark agreement to modernize its energy sector, the Government of Tunisia and the World Bank have finalized a US$430 million financing package — including US$30 million in concessional funding — to launch the Tunisia Energy Reliability, Efficiency, and Governance Improvement Program (TEREG). The five-year initiative will fast-track renewable energy development, transform the state-owned utility STEG, and overhaul governance to deliver reliable, affordable, and sustainable electricity to millions of Tunisians.

A Foundation for a Clean and Competitive Energy Market

TEREG is central to Tunisia’s newly updated Energy Transition Strategy, aiming to:

• Scale up solar and wind energy production,

• Improve the financial and operational performance of STEG,

• Attract private sector investment,

• Strengthen sector governance and transparency,

• Enhance access to cleaner and cheaper electricity.

“By fostering renewable energy development, TEREG will strengthen Tunisia’s position in clean energy, creating economic opportunities and ensuring long-term energy security,” said Alexandre Arrobbio, World Bank Country Manager for Tunisia.

TEREG will also complement other large-scale energy programs supported by the World Bank and its subsidiaries, including the Tunisia–Italy Electricity Integration Project (ELMED) and ongoing technical assistance from the IFC and MIGA.

Ambitious Targets by 2028

By the time the program concludes in 2028, Tunisia aims to achieve a dramatic energy transformation:

• US$2.8 billion in private investment will be mobilized,

• 2.8 GW of new renewable capacity will be added to the grid,

• 30,000 new jobs will be created, mainly during project construction phases,

• Electricity supply costs will drop by 23%,

• Cost recovery for STEG will increase from 60% to 80%,

• State subsidies will be reduced by TND 2.045 billion.

The program also aims to cut Tunisia’s carbon intensity, bringing the country closer to its Paris Agreement commitments.

Performance-Based Financing for Long-Term Impact

The TEREG project is the first initiative globally to benefit from the World Bank’s new Framework for Financial Incentives, which rewards programs that demonstrate long-term climate and development impact.

“The program’s reforms—such as reducing technical and commercial losses and increasing the share of renewables—are expected to deliver lasting improvements in the operational and financial performance of the sector,” said Amira Klibi, World Bank Senior Energy Specialist and Task Team Leader for TEREG.

This performance-based framework emphasizes impact over inputs, ensuring that reforms yield measurable improvements in affordability, reliability, and environmental sustainability.

Tackling STEG’s Structural Challenges

STEG, Tunisia’s national power utility, is pivotal to the energy reform agenda. Historically challenged by inefficiencies, financial strain, and dependence on fossil fuels, STEG will be at the heart of structural reforms.

The program aims to:

• Modernize its billing and collection systems,

• Reduce power losses during transmission and distribution,

• Improve its procurement and planning procedures,

• Restore financial viability and investor confidence.

These reforms are expected to make STEG more agile, transparent, and capable of delivering energy services that meet 21st-century standards.

A Global Model for Inclusive Green Growth

The TEREG initiative is not just an energy reform program — it's a blueprint for how developing countries can combine climate goals with economic development. It places Tunisia among a growing group of countries demonstrating that green transition can be inclusive, job-creating, and investment-friendly.

By blending public financing, private capital, and policy reform, Tunisia is charting a path toward energy independence and environmental sustainability — while strengthening its economy and improving lives.

“This project reflects our strong partnership with Tunisia and supports its sustainable development goals,” said Arrobbio.

The TEREG program aligns with Tunisia’s Country Partnership Framework, the Paris Agreement, and the World Bank’s broader commitment to financing a just and equitable energy transition in the MENA region.