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GDC power project partners struggle to raise Sh21 billion

Akinwumi Adesina
African Development Bank President Akinwumi Adesina when he toured the Menengai Geothermal field in Nakuru on July 21, 2018. FILE PHOTO | NMG 

Construction of Sh21 billion ($210 million) geothermal power plants at Menegai will delay on financing hitch.

The independent power producers (IPPs) at the Menengai Geothermal Project disclosed they are yet to secure financing for the venture, six years after they won the contract.

State-owned Geothermal Development Company (GDC) had handed construction sites to Sosian Energy, Quantum East Africa and OrPower 22, but the firms have not raised funds from banks as planned.

The disclosure is contained in the latest Energy, Infrastructure and ICT Sector working group submissions to the National Treasury as preparations for the 2020/2021 budget preparation begins.

“The three Independent power producers to construct 105 megawatt (MW) power plants are yet to attain financial closure with their lenders,” the disclosures read.

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The three firms had been selected in 2013 through competitive bidding to build, operate and own the first three power plants in Menengai, each generating 35MW.

GDC has already constructed the steam gathering system while Kenya Electricity Transmission Company (Ketraco) has set up a 132 kilovolt (kV) substation that will transmit electricity from the three power plants.

Under the arrangement — christened Menengai Model- GDC was to take care of upfront risks and then invite private sector players to construct, own and operate the plants for 25 years.

GDC said that it has fulfilled all conditions to support the project and was currently assisting IPPs meet conditions for financial closure with respective lenders.

The parastatal had earlier said the African Development Bank (AfDB) was in the process of approving loan financing to Quantum.

IPPs were to pay GDC Sh1.7 billion per year over the 25 years before eventually handing over the plants to the government.

The larger Menengai project is being developed in four phases, each of approximately 100MW. The estimated potential of the project is 1,600MW.

Kenya has been deepening supply of power from cheaper sources such as wind and steam. This is expected to translate to reduced power bills for consumers.

Data from the Energy and Petroleum Regulatory Authority shows that geothermal is the biggest contributor of power to the national grid, accounting for 44.12 percent of the total supply.

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