Banks team up to arrange wind power funds

Johannesburg-headquartered Standard Bank has partnered with a number of banks to arrange funding for the Lake Turkana Wind Power Project (LTWP).

The majority shareholder of CfC Stanbic Bank, South African Nedbank and the African Development Bank (AfDB are the mandated lead arrangers for the project to build a 310 megawatt (MW) wind farm in northern Kenya.

The total cost of the project including construction and transmission of power from the plant in Turkana County is expected to be Sh70 billion (623 million euros).

Besides being the arrangers the three lenders, along with the European Investment Bank, are among the 12 financiers of the LTWP. Standard Bank and Nedbank provided bank guarantees for the EIB commercial bank loan.

“The two banks will also be providing the interest rate hedge for the project, which reached financial close on December 11 , 2014,” Standard Bank said in a statement released from Johannesburg.

The wind farm will comprise 365 Vestas wind systems to be set up in Loiyangalani in Marsabit County, approximately 10 kilometres east of Lake Turkana, and will be constructed over a period of 32 months.

READ: Danish firm says 365 Turkana turbines order largest in its history

The project is expected to provide electricity to the national grid equivalent to 17 per cent of the currently installed generating capacity in its first year of operations.

The financing for the LTWP will comprise 70 per cent senior debt (ranking above other debt in repayment claim), 10 mezzanine debt (which means it can be converted into equity) and a 20 per cent purely equity stake.

“This transaction is a good example of how to successfully bring private players into the renewable energy sector and serves as a good vote of investor confidence in the Kenyan economy,” said Kwame Parker, Standard Bank East Africa Head of Power and Infrastructure.

The project is designed to provide a clean source of electricity and also contribute towards Kenya’s goal of significantly increasing its installed capacity and reducing reliance on more expensive sources of power.

As part of the project, LTWP will rehabilitate 204 kilometres of an existing road leading to the wind farm while Kenya Electricity Transmission Company Ltd will construct a 428-kilometre overhead transmission line as well as a sub-station to be located in Suswa town, 90 kilometres north of Nairobi.

Power from the project will be fed in the national grid on the basis of a 20-year power purchase agreement between LTWP and Kenya Power.

“The innovative and unique structure of this transaction is the culmination of four years of hard work together with our arranging partners with the aim of bringing the right funding solution to the participants in this deal,” said George Kotsovos, Power and Infrastructure Finance executive at Standard Bank.