Djibouti has launched a project to build a 300-megawatt (MW) solar power plant and is planning a 60 MW wind farm as part of an initiative to generate all the tiny nation's power from renewables within five years, a minister said.

The solar power plant, which will cost €360 million ($394 million), will be built in phases by German firm Green Enesys. President Ismail Omar Guelleh laid the foundation stone this week at the Grand Bara plain site, south of the capital.

Djibouti, home to an international port as well as US and French military bases, now relies heavily for its power via a link to hydropower plants in neighbouring Ethiopia. It wants to produce all its power from renewables by 2020.

Construction work starts in earnest on the solar plant in the first quarter of 2016, with the first of six phases completed by the end of 2016, Energy Minister Ali Yacoub Mahamoud told Reuters. Each phase is for 50 MW.

Electricite de Djibouti will sign a power purchase agreement to take power from the privately funded project, the first solar plant in Djibouti to be connected to the national grid, the minister said.

Djibouti is building smaller solar power plants to supply 25 villages in the next five years, with three of them already up and running, but none of these projects are connected to the grid, the minister said.

"We will soon proceed with the laying of the first stone of a wind turbine farm of 60 MW, financed by Qatar," the minister said, adding that a company to carry out the project was being chosen and the project could be launched in weeks.

Aside from the power link to Ethiopia which supplies about 65 per cent of Djibouti's needs, the country has just 100 MW of installed generation capacity of its own, some of which is not connected to the grid.

Limited access to a reliable power supply is seen as a major obstacle to growth across Africa.-Reuters