Kenyan banks have lost out on the lucrative financing deal for the Sh200 billion Lamu coal plant.
Amu Power Company — the consortium that won the tender to construct the plant — say the local lenders lack the depth to finance the mega project over a long period.
The $2 billion project will be financed through debt which accounts for three quarters ($1.5 billion), along with shareholders’ equity of $500 million.
“The local market does not have the depth in terms of quantum and the tenor. We need 15-year money or more. The local commercial banks would struggle to do 15-year money,” Amu Power CEO Francis Njogu said in an interview.
Central Bank of Kenya regulations limit the value of loans that banks can lend to a single individual bsed on their capital strength. The Kenyan energy sector regulator has announced plans to start denominating tariffs for power projects in shillings, which is expected to raise project financing by local banks.
KCB Group #ticker:KCB, the largest local lender by asset base, held a loan book of Sh422.7 billion in 2017.
The Amu consortium brings together firms like Gulf Energy, Centum investment, General Electric and Power Construction Corporation of China.
The developers bagged a $1.2 billion (Sh120 billion) finance package from the Industrial Commercial Bank of China in February 2015, and said it was looking for the more debt funding.
The African Development Bank is expected to provide a partial risk guarantee for the coal plant, the first in the region.
“We will be looking at environmental and human concerns surrounding the project before we make our commitment to it,” said Gabriel Negatu, the AfDB regional director-general.
The coal plant is part of the planned Lamu Port South Sudan-Ethiopia Transport (Lapsset) corridor and is set to place Kenya among African nations that use coal energy such as South Africa.
Its electricity will be priced in the same range as geothermal power at 7.52 US cents (Sh7.52) per unit — almost a third of what diesel-fired plants charge on average.
Construction has, however, suffered delays since 2015.
The Energy ministry reckons that the coal plant would help diversify Kenya’s power mix and drive growth.
At 1,050 megawatts, the proposed coal plant is equivalent to 44 per cent of Kenya’s current installed capacity of 2,400 megawatts.