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Economy

Consumers to pay Sh5.7bn for wind power line delays

The Lake Turkana Wind Power project. FILE PHOTO | NMG
The Lake Turkana Wind Power project. FILE PHOTO | NMG 

Kenya has agreed with the developers of Lake Turkana Wind Power project to charge electricity consumers Sh5.7 billion from next May as penalty for government’s failure to build a transmission line to the wind farm.

Energy principal secretary Joseph Njoroge said the deal was reached after months of negotiations with the foreign developers, their respective embassies and lenders, including the African Development Bank (AfDB).

Kenya had committed to start paying a monthly fine of Sh700 million through consumer bills should it fail to link the mega wind farm to the national grid by January this year.

The government failed to meet that obligation with the transmission line — currently 70 per cent complete, and expected to be ready next May — forming the basis for negotiations to defer fines payment for idle power.

“We have agreed to pay the fines based on the electricity they produce from May next year,” said Mr Njoroge.

Homes and businesses will pay the Sh5.7 billion surcharge through their power bills, equivalent to Sh0.1 per kilowatt hour (kWh) spread over a period of six years from 2018.

Energy ministry officials said the agreed surcharge with the investors stands at €638,889 (Sh78.6 million) per month, adding up to Sh5.7 billion in the six years.

The wind farm, the largest in Africa with a capacity of 310 megawatts, enough to power up to one million homes, was supposed to inject the first 50 megawatts to the grid last October and the whole capacity by July this year.

But delays in construction of the 428-kilometre power line has hampered electricity evacuation from the northern town of Marsabit to Suswa substation in Narok, the country’s main interchange for power coming from different sources.

This has left the wind farm developers with stranded power amid pressing cash needs such as loans repayment, an obligation that taxpayers will shoulder.

Consumers will also pay another Sh4.6 billion to a special fund created at the Treasury to cushion the Lake Turkana power investors from losses, bringing the total consumer costs, outside the normal electricity bill, to Sh10.3 billion.

The contingency facility will take care of risks associated with Kenya Power’s #ticker:KPLC payment obligations in the event that the electricity distributor fails to pay up the power producers.

UK-based Aldwych is the single largest investor in the €623 million (Sh76.6 billion) wind project with a 30.7 per cent stake while Google has a 12.5 per cent shareholding.

Electricity from the wind park will cost Sh8.7 per unit (8.5 US cents), which is in a similar cost range as geothermal power, or three times cheaper than diesel-generated electricity.

Other investors in the consortium include KP&P Africa B.V., Industrial Development Corporation of South Africa, Industrial Fund for Developing Countries, Norwegian Investment Fund for Developing Countries and Vestas Eastern Africa.

Kenya last month terminated the contract for the Sh20 billion transmission line, which is 70 per cent complete, with a debt-ridden Spanish contractor Isolux which bagged the tender in 2011.

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