Kenya intends to implement geothermal power projects with a combined capacity of 560 MW under a public–private partnership (PPP) framework, as part of efforts to enhance electricity generation from renewable sources.
The Kenya Electricity Generating Company (KenGen) says the first phase will comprise a 140 MW power plant in Naivasha, some 120 km from the capital, Nairobi.
The company is gearing up to unveil an international contractor to implement the Olkaria VI project on a ‘build, own, operate and transfer’ basis.
The companies vying for the contract include Ormat Technologies , Itochu Corporation, Sumitomo Corporation, Enel Green Power and a consortium comprising Engie Energie Services, Toyota Tsusho Corporation, Kyuden International Corporation and DL Koisagat Tea Estate.
“The successful bidder will enter into a joint venture with KenGen and incorporate a special-purpose vehicle (SPV). KenGen will be a shareholder in the SPV and will enter into a long-term power purchase agreement (PPA) with Kenya Power. The SPV will enter into a long-term steam supply agreement with KenGen. The project will then transfer to KenGen at the end of the PPA term,” KenGen says in a statement.
This will be the first project to be implemented by KenGen under the PPP framework. In the past, the company financed power projects through syndicated debt funding sourced primarily from multilateral and bilateral institutions, locally raised debt (infrastructure bonds), own equity and State-to-State concessionary funding.
KenGen, which is the leading power producer in East Africa, owns and has been operating geothermal power plants in Olkaria, Naivasha, since 1981.
Through the PPP projects, the company will enhance efficiency and manage costs, while achieving faster project completion, owing to the participation of the private sector.
The PPP projects will ensure a quick rate of conversion of steam into power, while reducing risk and the debt burden for KenGen. They will also enable technology transfer and capacity building.
Besides tapping into private financing, the PPP model will ensure project cost overruns are not borne by government agencies, facilitate innovation and better use of appropriate technologies, and ensure better exploitation of direct and secondary assets.
A report by the International Renewable Energy Agency highlights that Kenya has raced past Italy to emerge as the seventh-largest geothermal power producer in the world.
The country’s geothermal capacity currently stands at 823 MW, after increasing by 165 MW since last year.
Kenya’s ramping up of geothermal development has put it on track to join the elite Gigawatt Club of countries with geothermal production of 1 GW and more.
Currently, geothermal accounts for 30% of the East African nation’s installed electricity capacity of 2 700 MW.