A wind farm in Ngong, near Nairobi. Rea Vipingo wind power plant would have injected 48 megawatts into the national grid. FILE
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Wind speeds suggest project in Kilifi likely to be only marginally viable, says Nairobi bourse-listed agricultural firm.
NSE-listed sisal producer Rea Vipingo has shelved plans for a Sh8.5 billion ($100 million) wind power plant in Kilifi that would have injected 48 megawatts into the national grid, even as the company warns shareholders that it expects power costs to rise in the next year.
The company, which is the subject of three competing buyout bids, has in the past pointed at the erratic and costly electricity supply as a major constrain on its earnings, hence the proposed move to set up its own power source.
The energy produced by Rea Vipingo at the Kilifi wind farm would have been be transmitted to the national grid in addition to supplementing the company’s energy needs.
“The wind yield assessment that the group carried out in conjunction with a European utility company at Vipingo indicated wind speeds that suggested that a wind farm was likely to be only marginally viable.
Given an investment requirement estimated at around $100 million, the directors concluded that it would not be worthwhile to pursue this further,” said Rea Vipingo managing director Neil Cuthbert in a statement.
Rea Vipingo had contracted German renewable energy utility firm EnBW Kraftwerke AG to carry out the feasibility study and installations at the wind farm, with the agreement announced in mid 2013.
EnBW had proposed to install 24 turbines with a capacity of 2MW each and masts approximately 80 metres high for the project.
An environmental impact assessment study was done by the National Environment Management Authority (Nema), which in December 2012 collected public views on the proposed project.
Rea Vipingo has been pointing at energy costs as one of its main operational challenges both in Kenya and Tanzania, with the latter particularly affected by erratic supply that according to Mr Cuthbert brings near daily outages.
Rea’s administrative expenses went up by nine per cent to Sh628 million during the financial year ended September 2013. Its after-tax profit for 2013 jumped 16 per cent to Sh442.5 million driven mainly by a revaluation of its biological assets.
“Energy costs in both Kenya and Tanzania are expected to rise again this year,” added Mr Cuthbert.
In its recent review of power tariffs, industrial users saw an increase of up to 25 per cent on their power charges.
The new tariffs see the industrial power consumers pay between Sh20,00 toSh17,000 in fixed charges monthly, and between Sh6.60 and Sh8.70 per unit consumed, depending on the size of voltage connection.
Previously the fixed charges ranged from Sh800 to Sh11,000, and unit charges from Sh4.10 to Sh5.75.
Kenya Power justified the increases as necessary to fund grid expansion to enable up-take of additional power set to be generated under the government’s 40 month 5000MW plan.
Energy costs have been listed as one of the factors discouraging the setting up of production factories in Kenya with companies opting for Egypt and South Africa which have lower energy costs.
The Vipingo wind project was one of several such projects lined up in the country, which is looking to ramp up production of renewable power from wind and geothermal.
The biggest wind project currently in the pipeline is the 300 MW Turkana wind project, with two 100MW projects also proposed in Kajiado and Marsabit by US energy giant General Electric and KenGen respectively.
Other wind power projects are the Electrawinds Lamu wind farm with a capacity of 90 MW, the Kinangop project by Aeolus (60MW), Prunus Ngong Hills (50MW) and KenGen Ngong project (25MW).
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