Cabinet approves loan guarantees for power companies

Parliament is expected to endorse plans to expand the capacity and efficiency of the electricity network to meet growing demand through private sector loans.

On Tuesday, the Cabinet allowed the provision of sovereign guarantees to financiers of new generation power and transmission power projects under the New Planned Power Generation Capacity Programme.

In the plan, the Kenya Electricity Generation Company (KenGen) and the power transmission company (Ketraco) got the Cabinet’s nod to tap loans to complete ongoing projects as well as erect new power lines to carry higher voltage and meet growing demand.

Six ongoing hydro, geothermal and wind projects undertaken by KenGen will add 421 megawatts to the national grid by 2012.

Three hydro plants include Sangoro, Tana and Kindaruma ( 46 MW), while the Olkaria I-IV units will generate 360 MW and five megawatts from a wind farm near Ngong.

“The Cabinet approved to forward for Parliamentary approval the establishment of an escrow guarantee fund for semi-concessional loans for external borrowing by KenGen and Kenya Electricity Transmission Company (Ketraco) from the European Investment Bank ( EIB) and the German development bank KfW to finance the additional power generation of 421 MWs,” said the Cabinet brief.

KenGen’s managing director, Mr Eddie Njoroge told the Business Daily that KfW and JICA are asking for sovereign guarantees before disbursing funds for the geothermal plant and the Kindaruma power plant.

The Cabinet also allowed the Kenya Power and Lighting Company ( KPLC) to borrow funds from Nordea Bank of Finland to construct power lines between Lessos to Kisumu in western Kenya, as well as construction of the Juja Road substation.

According to Mr Joel Kiilu, chief executive for Ketraco, a total of Sh4.1 billion in loans have been negotiated to put up new transmission lines .

“The government has allocated Sh3.7 billion this year. We intend to build alternative power lines and cushion consumers against power outages partly through loans,” he said .

Among the planned lines are the 400 kilovolts line over the 430 kilometres Suswa and Lake Turkana, with funding by the Spanish government while the power inter connector between Lessos in western Kenya and Tororo in Uganda will be funded by the African Development Bank( AfDB).

By interconnecting with Ethiopia, Mr Kiilu said Kenya can tap up to 1,000 MW from her northern neighbour.

“Out of the 31, 900 megawatts that Ethiopia has, they require only 700 megawatts,” he said.

Other planned lines include; Chemosit-Kisii, Samburu-Meru and the Sondu Miriu- Kisumu, Eldoret- Kitale, Lessos-Tororo ( Uganda), Nairobi- Moyale (Ethiopia), Kisii- Awendo.