Centum gets insurance cover for geothermal power project

A geothermal well in Menengai, Nakuru County. PHOTO | FILE
A geothermal well in Menengai, Nakuru County. PHOTO | FILE 

Centum Investment geothermal power plant has secured a risk cover from Munich Re, paving the way for funding of the well drilling.

The giant German reinsurer said the risk cover is meant to compensate investors in the Akiira One project in case the eight geothermal wells being drilled in the Olkaria, Nakuru County, do not produce enough power.

Centum Investments is in a consortium that is developing the $300 million (Sh30 billion) geothermal power project expected to produce 140 megawatts by December 2018.

The cover is meant to make investors comfortable to put money at the exploration stage, which is the riskiest in geothermal power production.

“The early drilling phase is the most difficult one for contractors and investors: if the targeted geothermal reservoir is unable to produce enough output in steam or heat, the project is usually discontinued and the investment lost,” said Munich Re in a statement.

“Munich Re now covers such resource risks with its Multi-Well Exploration Risk insurance, thereby helping ambitious projects be realised.”

It did not disclose the size of the cover but said the premiums would be paid in instalments as the project progresses.

The Centum consortium is expected to contribute 30 per cent of the funding or Sh9 billion while the Sh27 billion will come from a loan by Standard Bank.

The listed firm owns a 37.5 per cent equity stake in Akiira One with American firms — Ram Energy, Marine Power — and Frontier Markets, a Danish investment firm, owning the remaining 62.5 per cent stake.

The information memorandum on Centum’s Sh6 billion bond offer says it will use a fifth of the proceeds for the geothermal project.

“In Akiira Geothermal, Centum has committed to invest at least $37 million (Sh3.7 billion). Centum plans to use 20 per cent of the bond proceeds to finance part of its equity stake in the Akiira Geothermal project.

Further investments in the project will be funded from internally generated funds.”

Akiira One is the first geothermal plant to be funded by the private sector and the developers plan to use the project as a blueprint for other similar initiatives.

“Geothermal heat offers an immense reservoir of base load energy. Akiira will be a pilot project for us, so that other projects can follow,” said Ram Energy chief executive Hezy Ram.

Centum also plans to put up a 1,050 megawatt coal-fired power plant in Lamu County.