KenGen to branch into fertiliser production

Managing Director(MD) and Chief Executive Officer(CEO) of Kenya Electricity Generating Company (KenGen), Ms Rebecca Miano on March 18, 2021. PHOTO | JEFF ANGOTE | NMG

State-owned Kenya Electricity Generating Company (KenGen) has revealed plans to set up a fertiliser plant at a time an acute shortage of the vital farm input is threatening success of the country's crops and could lead to widespread food shortages.

KenGen has kicked off the search for consultants to determine the viability of fertiliser production at its Olkaria fields in Naivasha in a fresh revenue diversification bid.

“(KenGen) now invites proposals to provide the following consulting services to undertake a feasibility study for green hydrogen, ammonia and fertiliser production and its pilot plant at Olkaria, Naivasha – Kenya,” said KenGen in tender documents.

The Business Daily learned from insiders that KenGen is confident the fertiliser-making venture is profitable once it is scaled given the huge market gap for the products in the country and KenGen’s strategic advantages in a future production process.

The feasibility study will determine the size of the proposed plant and timelines for its construction, said KenGen.

In setting up the plant, KenGen would rely on its own source of electricity which it reserves for auxiliary uses, giving it another strategic advantage.

KenGen would also be taking on existing players such as Japanese conglomerate Toyota Tsusho and Kenyan fertiliser maker Fertiplant East which have plants in Eldoret and Nakuru respectively. Ammonia is produced in vast quantities worldwide for agricultural fertilisers but uses natural gas or other fossil fuels.

Green hydrogen and ammonia-producing plants have gained traction around the world as geothermal producers eye revenue diversification drives.

The plans by KenGen come at a time quantity of fertiliser available globally has almost halved, while the cost of some types of fertiliser has nearly tripled over the past 12 months, according to the United Nations.

That is having a knock-on effect in countries like Kenya, where farmers are dependent on imported fertiliser.

The surge in global fertiliser prices began at the start of 2021 due to the impact of the Covid-19 pandemic. The ongoing war between Russia and Ukraine worsened the situation.

Currently, fertiliser prices in Kenya stand at Sh6,000 per 50-kilogramme bag, a 71 per cent increase from a year earlier.

The jump in prices is also due to producer countries such as China, Russia and Turkey restricting exports to protect their farmers compounded by heavy demand from India, Brazil and US buying up large quantities, reducing available global supplies.

Kenya recently received a Sh7.48 billion loan from the African Development Bank (AfDB) to support fertiliser and seeds acquisition for 650,000 local farmers to boost food production and control consumer price inflation.

The country earlier announced a Sh5.7 billion fertiliser subsidy to partially offset high prices.

KenGen peers around the world have upped revenue diversification plans in recent years. They have for instance turned to the use of geothermal fluids for mineral baths and to heat homes, greenhouses and furnish hot water to local communities in certain areas of the world.

KenGen, whose Olkaria geothermal field covers over 20,400 hectares, forcefully redirects hot brine back to the ground primarily to maintain reservoir pressure.

But its geothermal hot waters (brines) contain compounds and elements that can provide opportunities for high-value products such as borate fertilisers, according to some studies.

The new ventures of using geothermal by-products will potentially cut KenGen’s reliance on electricity sales to the national grid, which accounts for over 90 per cent of its income.

KenGen earlier said that brine from its Olkaria fields contains about 600-800 milligrammes (mg) of silica per kilogramme of the fluid and 1.5 and 2mg per kilogramme of lithium.

Lithium is mostly used in making batteries, toys, medicine to make pacemakers and also, combined with aluminium forms an alloy which makes high-speed railcars and planes.

Lithium, a key component for batteries used in electric vehicles, is currently trading at about $13,000 (about Sh1.3 million) per tonne in China, which is the world’s biggest consumer of lithium.

PAYE Tax Calculator

Note: The results are not exact but very close to the actual.