Wind power plan hangs in balance after donor row

• LTWP is owned by four local shareholders: Businessmen Carlo van Wangenigen, John Thiong’o Mwangi, William Dolleman and managing director Chris Staubo.
• The foreign shareholders in the LTWP consortium are KP&P BV Africa, Aldwych International Limited, International Development Corporation of South Africa Limited, Norwegian Investment Fund for Developing Countries, Industrial Fund for Developing Countries Denmark and Vestas.

The Sh66.6 billion Lake Turkana Wind Power (LTWP) project has parted ways with its multilateral backer as its promoters said they can no longer count on World Bank guarantees.

The sponsors said they would not wait for the guarantees known as Partial Risk Guarantees (PRGs), to mitigate against any perceived political risks, from the World Bank-supported underwriter, the Multilateral Insurance Guarantee Agency (Miga).

The move casts a cloud over the grand project and probably signals further delays.

LTWP cited the Bank’s lengthy internal processes and said the Government had agreed to progress the project through alternative credit enhancement packages.

“We are ready to move on with an alternative solution without the World Bank. It never had a direct role in LTWP. They were purely to assist with political risk insurance and PRGs,” said chairman Carlo Van Wangenigen. Its main financiers are the African Development Bank (AfDB), the project’s lead arranger with Standard Bank of London and Nedbank Capital of South Africa as co-arrangers.

“The World Bank will not offer guarantees for energy payments under the power purchase agreement or to cover termination obligations to project lenders and equity holders,” confirmed its Nairobi spokesman Peter Warutere indicating the intended 300MW may not be easily absorbed by customers.
Energy Permanent Secretary (PS) Patrick Nyoike confirmed the World Bank option had been abandoned.

“We are continuing with the project without the World Bank support. The investors of the project have told us they do not require it,” said the PS on telephone.

The project, being undertaken by a consortium of European and African companies, is estimated to cost Sh62.6 billion (585 million Euros) with the World Bank guaranteeing Sh4.5 billion (42 million Euros).
The World Bank also guarantees to step in and finance if need be while Kenya Power is supposed to guarantee buying the power generated.
It is the failure to clearly break down how much power can be absorbed into the national grid at the various demand periods (peak and off-peak) that has caught the attention of the World Bank.
“After extensive discussions between the World Bank Group and the project, the bank reached the conclusion the LTWP project, as currently proposed, is not a good fit for it. We have informed the government and the project sponsors of this decision,” said World Bank.
On Tuesday, neither the PS nor Kenya Power was forthcoming about the proposed substitute guarantee in form of an escrow account.

hey only said it was meant to provide cover for related infrastructure projects like compensation for those displaced during construction of the planned transmission lines, sub-stations, a road to open up the area among other related projects.

The project stalemate kicked off with a State request that the World Bank, a key player in the power purchase agreement (PPA), guarantees a constant uptake of power from the plant. The PPA between the investors and the government stipulates power produced by the plant will be bought at a rate of 7.52 euro cents/kwh by Kenya Power over a 20-year period.

“Why would Kenya Power be willing to take up that risk if World Bank cannot. Right now, it is not clear how things are going,” said a Kenya Power official who did not wish to antagonise the players.

LTWP is owned by four local shareholders: Businessmen Carlo van Wangenigen, John Thiong’o Mwangi, William Dolleman and managing director Chris Staubo.

The foreign shareholders in the LTWP consortium are KP&P BV Africa, Aldwych International Limited, International Development Corporation of South Africa Limited, Norwegian Investment Fund for Developing Countries, Industrial Fund for Developing Countries Denmark and Vestas.