Cement tycoon buys Moi out of Sh8bn Menengai power plant firm

Steel and cement tycoon Narendra Raval has bought Baringo Senator Gideon Moi’s stake in a company that won a lucrative deal to build a 35-megawatt geothermal power plant in Menengai, Nakuru County.

The billionaire’s Devki Group now fully owns Sosian Menengai Geothermal Power, one of the three firms that State-owned Geothermal Development Company (GDC) awarded exclusive rights to set up a steam plant under a build–own–operate model.

READ: US power firm in shortlist for Menengai plants

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Mr Moi previously owned a stake in the geothermal venture through an entity dubbed Sosian Energy Ltd, but has since relinquished his stake.

Mr Raval, known by his nickname Guru, has interests in steel making, cement manufacturing, roofing materials and aviation.

His stable includes Devki Steel Mills, roofing sheets maker Maisha Mabati Mills, National Cement, which makes ‘Simba Cement’, and Northwood Agencies Ltd, a helicopter charter company.

Mr Raval declined to comment on the shareholding changes at Sosian Menengai Geothermal Power Ltd, saying the electricity generating venture will help diversify his interests and deliver cheaper geothermal power to industries.

The businessman said the investment in geothermal power plant will top $82 million (Sh8.2 billion) and groundbreaking is slated for mid-March.

Construction of the plant is expected to take about 18 months.

“Industries want cheaper power like geothermal,” Mr Raval said adding that “the returns are good.”

Mr Moi, who is also Independence party Kanu chairman, is also in another deal to set up a 40 MW solar farm along the Nakuru - Marigat Road in Nakuru County.

His firm, Sosian Energy, is in a joint venture with Astonfield co-founder Ameet Shah to put up the $65 million (Sh6.5 billion) solar park starting later this year.

READ: Ex-Centum executive to set up 40MW solar energy farm in Nakuru

Change in ownership structure of a bidding consortium already awarded a construction licence would have required regulatory approval, but GDC managing director Johnson 0le Nchoe confirmed that Devki was part of the Sosian Energy consortium at the tendering stage.

“We don’t come in on internal matters. They only need to meet conditions of the project implementation and steam supply agreement,” said Mr Nchoe.

Energy secretary Charles Keter confirmed Devki Group as the investor now fully in charge of the project, which has faced incessant delays - and is yet to break ground nearly three years down the line.

He, however, declined to divulge details of the deal, turning the heat on GDC to ensure the project takes off by end of next month.

“I want to see the investors begin constructing these power plants. This project has faced a lot of delays,” said Mr Keter in an interview.

Work yet to start

New York Stock Exchange-listed Ormat Technologies and Quantum Power are the two other firms selected to build a 35 MW steam power plant each on a public-private partnership basis.

The three firms were picked in mid-2014, but work on the power plants is yet to kick off to date.

GDC has signed a deal with the three independent power producers (IPPs) to supply them with steam at a cost of ¢3.5 (Sh3.50) per kWh excluding value added tax, according to contract documents seen by the Business Daily.

President Uhuru Kenyatta is banking on clean and cheaper sources such as geothermal and wind to halve the cost of electricity to Sh10.45 (¢10.45) per kilowatt hour from the current average of Sh20 (¢19.78) per unit for domestic households.

Kenya’s total installed capacity stood at 2,341 MW with a basket mix of 35.6 per cent thermal, followed by hydro (35.06 per cent), geothermal (27 per cent), wind (1.1 per cent), with solar and biogas making up the rest.

Flourishing energy sector

Mr Raval’s entry into the power generating business underlines the lucrative nature of Kenya’s energy sector, which continues to attract deep pocketed investors.

Akiira Geothermal Ltd – owned 37.5 per cent by listed firm Centum – in August 2015 signed a power purchase deal with Kenya Power to supply 70 MW of steam power.

The remaining 62.5 per cent stake is owned by American firms — Ram Energy and Marine Power — and Danish Frontier Markets.
Mombasa Cement last month announced plans to build a 36 MW wind farm at a cost of Sh260 million in Kilifi for its own use and export to the grid.

Kenya offers investors a choice of either local or foreign currency denominated feed-in-tariffs; with the latter being favoured by international financiers.

Furthermore, Kenya’s energy regulations stipulate that Kenya Power, the sole electricity retailer, must sign 20-year power purchase agreements (PPA) with power producers, offering comfort to private investors to recoup their investments.

The ongoing 310 MW Lake Turkana Wind Power project, for example, has a Euro currency tariff at €7.52 cents per kWh. Most of the other private power producers have dollar prices.

For example, OrPower - Kenya’s sole IPP in steam power generation – has a tariff of ¢8.5 per kWh. Most of KenGen’s power purchase tariffs are in shillings.

GDC began drilling at Menengai field in February 2011 and has so far sank 34 wells with a confirmed output of 137MW.

The agency has invested a total of Sh39.6 billion in the Menengai project to drill, buy seven rigs, develop infrastructure such as roads, water pipeline; and a steam gathering system.

H Young is currently building the network of pipes tapping underground steam to the three privately-owned power plants.

A high voltage line to evacuate the 105 MW from Menengai to the national grid is currently under construction.

Works on the 12.6 kilometre Menengai - Soilo transmission line began in April 2014; and are now 95 per cent complete, according to the Kenya Electricity Transmission Company. The project also includes building a substation at Menengai.