Turkana Wind hits back at World Bank

The firm behind the ambitious wind power project whose backing the World Bank withdrew early this month has faulted the multilateral financier for supporting the more expensive thermal production contracts.

The statement came as Lake Turkana Wind Power (LTWP) and its financial backer, the African Development Bank (AfDB), yesterday said they would implement the project despite the World Bank’s reservations.

LTWP, dumped by the World Bank over concerns that it would saddle the public with up to Sh8.5 billion worth of electricity that cannot be disposed of, said the global lender is backing up 280 megawatts of expensive thermal power around Nairobi.

“Three heavy fuel oil thermal plants around Nairobi totalling 280MW have signed PPAs (power purchase agreements) with Kenya Power with the same structure and received the World Bank guarantee earlier this year,” said the firm as it confirmed implementation of the Sh75 billion 310 megawatts project. The statement quoted Carlo Van Wageningen, chairman of LTWP, saying PPAs were standard globally.

Johannes Zutt, the World Bank country director for Kenya, was in August quoted saying that the 87 Megawatts Thika thermal power plant would be the first to benefit from the partial risk guarantees totalling $166 million.

Others associated with the bank are the Athi River-based Triumph Generating Company and Mombasa Road-based Gulf Power with an estimated capacity of at least 80 Megawatts each.

All are expected to operate with 20-year contracts from Kenya Power on a build-operate-and-transfer basis.

The World Bank in a letter earlier obtained by the Business Daily had justified discontinuing guarantees to the project partly because of the possibility that Kenya Power would be exposed to the liability of absorbing 30 per cent of the up to $100 million (Sh8.4 billion) surplus electricity, with the balance of 70 per cent (Sh5.9 billion) being absorbed by consumers.

It also expressed fears that Kenya Power may not have experience to take in large wind power amounts while Kenya Electricity Transmission Company (Ketraco) may not construct a line to the national grid on time.

Yesterday, LTWP maintained its PPAs was similar to those entered with the Independent Power Producers (IPPs) despite the cost of the latter being higher.

“These plants will cost approximately twice that of LTWP, will rely on the expensive fuel imports and are not expected to be fully utilised during operations,” said LTWP.

The World Bank did not address the issues especially on IPPs on Tuesday.

“After extensive discussions between the World Bank Group and the project, the Bank reached the conclusion that the Lake Turkana Wind Power (LTWP) project, as currently proposed, is not a good fit for the Bank,” said the bank’s spokesperson, Peter Warutere.

Much of the LTWP dispute has revolved around absorption of the off-peak surplus. The World Bank has proposed that LTWP be staggered to enhance absorption of the power into the economy.

Energy permanent secretary Patrick Nyoike and the government have expressed confidence that the economy can absorb this due to the national reserve deficit. The African Development Bank has also disputed the World Bank’s view.

AfDB regional director Gabriel Negatu said: “We seem to have a different view on energy utilisation risk in Kenya with our other partners.

But again, that notwithstanding we will proceed and very soon we will bring this to closure and finance one of the biggest wind power projects in the continent.”

Mugo Kibati, the director Vision 2030, while saying that he was not supporting any financial model, in reference to the World Bank withdrawal, also disagreed with the financiers’ contention that there could be a problem with absorption.

“The power supply is already constrained and we have investors walking away as a result,” he told the Business Daily. He added that the issue of Ketraco not constructing the line in time for the Vision 2030 flagship project was a matter of one party’s opinion.

Kenya Power MD Joseph Njoroge said a team from his company, the Energy Regulatory Commission and the Ministry of Energy would look at the issues raised by the World Bank but indicated the project was going ahead.

The government has embarked on an ambitious programme to increase sustainable power production with wind power seen to be one of the cheapest source. The Turkana project tariff at 7.52 euro cent per kilowatt hour is one of the cheapest in Kenya.