The European Investment Bank has offered a Sh19.5 billion loan to a firm partly owned by Centum Investments for generating geothermal electricity.
The EIB on Tuesday said that the €155 million (Sh19.5 billion) financing package to Akiira Geothermal Ltd will be finalised soon.
The power project is based in Akiira Valley in Naivasha and will have a capacity of 70 megawatts upon completion.
“The loan is under commercial terms but will be lower than 10 per cent interest in euros after risk pricing,” said EIB East Africa head Catherine Collin on the sidelines of an energy conference at Strathmore University in Nairobi.
Investment firm Centum, which is listed on the Nairobi Securities Exchange, has 37.5 per cent equity in the Sh39 billion (€310 million) project.
The electricity will cost Sh9.5 per unit (9.23 US cents) under a power purchase agreement signed in August 2015 with electricity distributor Kenya Power. The project is being financed through a mix of debt (70 per cent) and equity (30 per cent), according to the executives.
Akiira was to start power generation by December 2016 but suffered delays after exploration of its initial wells yielded less steam, prompting further drilling and tests.
The company started exploration in August 2015, targeting to drill up to 15 steam wells, each with an average capacity of five megawatts, bringing the expected installed capacity to about 75 megawatts.
Centum owns a 37.5 per cent equity stake in the Akiira consortium, with the remaining 62.5 per cent owned by American firms Ram Energy and Marine Power, and Danish Frontier Markets.
The Centum consortium is expected to contribute Sh11.7 billion or 30 per cent of the project’s cost of €310 million (Sh39 billion) while the rest will be funded through commercial loans.
The geothermal project is partly funded by former US President Barack Obama’s Power Africa initiative for lighting up the continent.