UK company to pay Sh14.5bn for Lake Turkana Wind Power stake
Lake Turkana Wind power ltd CEO Phylip Leeferink (left) and Executive Director Rizwan Fazal appearing before the Senate Committee on Energy to respond to queries on the high cost of electricity at Parliament Buildings on April 17, 2023. PHOTO | LUCY WANJIRU | NMG
UK-based firm CFP UK Holdings Limited will pay Sh14.5 billion to acquire a stake in Lake Turkana Wind Power (LTWP) Limited, which built the Sh95.2 billion (€630 million) wind farm through debt and equity.
Transaction advisers who participated in crafting the deal told the Business Daily the amount would be settled soon following the Competition Authority of Kenya (CAK) clearance of the England and Wales-incorporated firm to acquire a 31.25 percent stake in LTWP.
The CAK said in last week’s gazette notice it had cleared CFP to proceed with the deal. LTWP had in March made a formal application to the Energy and Petroleum Regulatory Authority to be allowed to sell the stake to CFP UK Holdings Limited.
“It is notified for general information that in the exercise of the powers conferred upon the Competition Authority by section 46 (6) (a) (ii) of the Competition Act, the Competition Authority has authorised the proposed transaction as set out herein,” said Adano Roba, acting director general at CAK.
The competition watchdog clearance came days after the firm failed to overturn a High Court ruling that the land on which the project sits was acquired irregularly and without due process.
The 150,000-acre piece of land where the project sits is now set to revert to locals after a one-year window issued in 2021 to regularise the deal lapsed.
The landmark ruling could open the way for the community to seek compensation, as government agencies will be required to hold public participation forums.
The CFP deal is coming ahead of 2024—the year the company estimates it will have fully recouped its investment in the project, according to earlier approximations.
LTWP, a 310-megawatt wind-powered electricity generation plant, is currently owned by six shareholders including Anergi Turkana Investments Limited and KP&P Africa B.V, a Dutch company.
Other shareholders include Danish Climate Fund through Investment Fund for Developing Countries, Vestas Eastern Africa Limited, Finnish Fund for Industrial Cooperation and Sandpiper Limited.
LTWP entered into a power purchase agreement (PPA) with Kenya Power in 2009, agreeing to be selling the energy at 8.529 euro cents (Sh12.88) per kilowatt hour (kWh) for the first six years and then start charging at 7.684 euro cents (Sh11.61) per kWh.
The difference in tariff was to recover €81 million (Sh12.2 billion) balance as a penalty to the government for delaying the construction of the transmission line.
The project was built through a complex financing arrangement that comprised a mix of debt and equity. Out of the total project cost of €630 million, debt comprises €475 million (Sh72 billion), sourced from a consortium of senior and subordinated lenders.
LTWP has been paying the debt twice every year—in March and September— with the last payment expected in 2024. This amounts to about €75 million (Sh11.3 billion) in repayment per year.
The project also signed a 15-year service agreement with Danish firm, Vestas, to design, manufacture, install, and service wind turbines.
The firm takes about 18 percent of LTWP turnover, according to details given earlier.
According to information available on the LTWP website, the technology is likely to become obsolete after that and it may need to open negotiations with Kenya Power to extend the power purchase agreement, if necessary.
