Aldwych raises its stake in scramble for energy market

Owners of the Sh55 billion Lake Turkana Wind Power Project have signed a new shareholders agreement unravelling an intense scramble among international investors for a piece of Africa’s biggest wind farm.

It has emerged that Aldwych International, with operations in more than 15 countries, has become the main shareholder in the firm, with a 51 per cent stake in the 300 megawatts green-field wind power project in northern Kenya.

Aldwych is an old player in Kenya’s energy market, with a big stake in the Rabai thermal power plant that supplies 90 megawatts to the national grid. Its entry into the wind power project was made easier by exit of Globeleq, the United Kingdom private equity firm that pulled out of negotiations to buy a controlling stake in the project last November, nearly derailing Kenya’s largest green energy project.

LTWP signed a power buying deal with the off taker last Friday and will supply the national grid at a price of Sh7.80 (7.22 euro cents per kwh) —the cheapest source of power in Kenya. Actual generation of power is expected to begin in June, 2012.

Wind power is expected to help secure Kenya’s energy needs and shield the country from price volatility that is associated with irregular weather patterns.

Current generation mix is made of 7,19MW hydro, 163 MW geothermal, and 407 MW thermal power—including 290 MW from emergency power producers.

That output stands against real demand level of 1,135 MW and peak demand of 1107 such units, leaving the reserve at just four per cent against a recommended threshold of 15 per cent.

Unlike agreements signed with other independent producers, the KPLC/LTWP deal does not provide for the so called “capacity charges” that oblige KPLC to pay for power it has not used.

Globeleq owns the 75 megawatts Tsavo thermal plant in Kipevu near Mombasa and is part of the consortium of international companies that is mining natural gas in Songo Songo, Tanzania.

The fund is part of the UK’s CDC Group —one of the largest private equity players in emerging markets’ energy sector. Its interests are spread across multiple power facilities in 20 countries adding up to 4,000 megawatts.

Aldwych’s Rabai Power plant is worth about Sh11.7 billion and is among the largest single investments in Kenya and started delivering the much needed power to the national grid from last October.  

It has bought a 51 per cent equity stake in the consortium that controls the wind firm project. KP&P B.V, a Dutch company that develops and operates wind energy projects, and eight individual founding investors have a 30 per cent stake in the wind farm.

LTWP is the brainchild of businessmen Carlo van Weinegen, John Thiong’o Mwangi, William Dolleman and Chris Staubo. Matere Keriri, a former director general of the Energy Regulatory Commission, and who has vast knowledge of electricity regulatory issues, is also an official of the company. The foreign shareholders are in a consortium of mainly Dutch investors led by KP&P of the Nertherlands and are mainly manufacturers of wind power generation equipment.

Some 19 per cent of the shares have also been reserved for South Africa’s Industrial Development Corporation (IDC), a self-financing, national Development Finance Institution (DFI).

“We have found other equity players and will soon reach an agreement with them,” said Henk Hutting, the LTWP managing director.

Last week, the investors said they hoped to recoup their joint debt and equity investments by the fifth year of operation. KPLC is responsible for the revenue to service the huge loans in accordance with a power purchase agreement.

The project entails construction of a wind farm consisting of 365 wind turbines, each with a capacity of 850 kilowatts and is the first of its kind in Kenya.

The second major component of the project involves building of a 400- kilometre power transmission line from Laisamis in Marsabit through Maralal, Rumuruti and Longonot, where the wind farm will connect to the national grid.

The cost of the transmission line -- to be built on a buy, operate and transfer basis- is estimated at Sh14 billion.

LTWP hopes to supply 300 MW (or 17 per cent) of power to Kenya’s national electricity grid putting the country in the clean energy gravy train.

The Dutch consortium has leased 66,000 hectares of land on the eastern edge of the world’s largest permanent desert lake. The volcanic soil is scoured by hot winds that blow consistently year round. According to Mr Carlo Van Wageningen, chairman of the company, the average wind speeds in Turkana stands at 11 metres per second, akin to “proven reserves” in the oil sector. 

If the project succeeds, the firm estimates that there is the potential for the farm to generate a further 2,700MW of power, some of which could be exported.

Under the new arrangement, the state and not LTWP will construct a 266-mile transmission line and several substations to connect the wind farm to the national grid.

The African Development Bank (AfDB), the lead financial arranger for the project, has been asking for a government guarantee to cover the risks in the private-sector funded project.