The African Development Bank (AfDB) is engaged in talks with the government to guarantee the financiers of the Sh66.5 billion Lake Turkana Wind Power Project (LTWP).
This is after a long search for an insurer that could have caused further delay of one of Africa’s biggest power projects.
“There was a big team here last week. There is hope that the financiers will provide us with guarantees,” said an official privy to the goings on who cannot be named for protocol reasons.
LTWP spokesman Mary O’Reilly said she would give a comprehensive update on Friday, while Energy permanent secretary Patrick Nyoike did not respond to our queries.
The World Bank withdrew its guarantees in October 6 last year describing the 300 Megawatt project as not being a good fit. This is after fears that much of the power produced may end up unconsumed, impairing LTWP ability to pay creditors.
“After extensive discussion between the World Bank Group and the project, the Bank has reached the conclusion that the project, as currently proposed, is not good for it,” the World Bank country director for Kenya Johannes Zutt stated in a letter to the government and the project’s financiers.
AfDB officials in Kenya, however, viewed the project as feasible, with Gabriel Negatu, the regional director for eastern Africa, saying last month the bank was looking for other guarantors.
“We seem to have a different view on energy utilisation risk in Kenya with our other partners. We will proceed and very soon we will bring this to closure,” Mr Negatu said.
Sources say the government is set to provide letters of support to the financiers in the expectation that talks with AfDB would lead to the signing of the guarantees next month.
This would see AfDB, already the project’s lead financier, also provide Partial Risk Guarantee (PRG) to other financiers and debt co-arrangers that include the Standard Bank of London, Nedbank Capital of South Africa and the European Investment Bank.
Presently, the financiers are in the country on a due diligence mission of Kenya’s power transmission system and the wind farm. The two week visit will end on Friday.
Construction of the wind farm, one of Kenya Vision 2030 flagship projects, will be done by UK-firm Aldwych International, also LTWP’s principal shareholder, and Wind Power S. A (Vestas), a Danish firm and equity holder.
The project was set to be fully operational by next year but has lagged behind because of failure to reach financial closure.
Once complete it will provide low cost wind power to the national grid equivalent to approximately a fifth of the country’s installed generating capacity.