A Kenyan gold explorer is the latest investor seeking to get into power production with the planned construction of a 140 megawatts (MW) geothermal plant in Turkana County.
Olsuswa Energy, a company owned by Mayfox Mining’s chairman Manga Mugwe, is seeking to construct the power plant at a cost of $402 million (Sh42.8 billion), with planned transmission into the national electricity grid.
Most of the capital outlay is expected to be in the form of debt from development finance institutions including Denmark’s DI Frontier Market Energy & Carbon Fund.
The energy firm says it will begin exploratory work in the first quarter of 2016, drilling a year later and planned transmission of the first phase of the 70MW expected to happen in 2022.
Mayfox Mining is currently prospecting for gold and other precious metals in Turkana and the planned power production marks a significant diversification step for the entrepreneur.
“The growing demand for electricity by the country informed the decision to make this long-term investment in a dynamic industry,” Mr Mugwe told the Business Daily in an e-mail interview.
“We are seeing the creation of the East Africa power pool which shall see countries trade in energy. We have not yet signed a power purchase agreement with Kenya Power.”
Mr Mugwe’s company will be prospecting at the Barrier Volcanic Complex, an area south of Lake Turkana where reconnaissance surveys by the British Geological Survey have shown signs of hydrothermal resources.
The project is set to begin with the drilling of three vertical test wells, each going down to a depth of 3,000 metres, and at an estimated cost of $40 million (Sh4.08 billion).
Funding for the capital-intensive project is coming from DI Frontier Market Energy & Carbon Fund and Mayfox Capital LLP.
Olsuswa Energy is also eyeing a grant from the Geothermal Risk Mitigation Facility (GRMF), a Sh12.4 billion fund managed by the African Union, the KfW Development Bank and the European Union.
“We shall potentially receive the risk mitigation facility for the project from the GRMF programme,” said Mr Mugwe.
Studies by the Ministry of Energy show that Kenya has the potential to produce about 10,000MW of geothermal power from the Rift Valley basin, explaining the exploratory work by Olsuswa Energy.
Kenya’s installed steam power capacity now stands at 579MW following KenGen’s injection of 280 megawatts produced in Olkaria to the grid last year.
Geothermal now accounts for 29 per cent of Kenya’s energy mix, up from the previous 13 per cent four years ago, in line with the State’s goal of reducing reliance on non-renewable and expensive sources of power.
Development of geothermal power is capital intensive, making it a preserve of firms with deep pockets such as KenGen.
Most investments in the renewable energy sector are happening in the wind category which constitutes just one per cent of total generation being fed into the national grid.