KenGen seeks Sh5.7bn to set up solar power plant

Power producer Kenya Electricity Generating Company (KenGen) #ticker:KEGN has approached multilateral lenders for Sh5.7 billion funding to construct its first solar-powered station at.

The company said it was seeking the funds from the World Bank, French Development Agency (AFD) and KfW of Germany – the traditional lenders for the State-owned power firm.

Construction of the proposed 45-megawatt (MW) plant is expected to take 14 months. It will be located in Embu near the company’s hydroelectric power stations and is known as the Seven Forks Solar project.

“We finished feasibility studies for the project and we’re now seeking funding,” said KenGen business development director Moses Wekesa. The project will sit on 100 hectares of land.

Upon securing the funds and preparing the engineering, procurement and construction (EPC) contract, the firm will then sign a power purchase agreement (PPA) with electricity distributor Kenya Power #ticker:KPLC.

The PPA indicates the tariff at which the producer will sell the electricity to Kenya Power for onward retail to homes and businesses.

The feed-in-tariff for solar projects (between 10 and 40 megawatts) stands at Sh12 per unit ($0.12), meaning KenGen’s 45-MW plant is not bound by the predetermined tariff.

Kenya adopted the feed-in-tariff in 2008 as a policy instrument to attract investors in the renewable energy space as an alternative to expensive diesel-generated electricity.

Kenya Power is obligated to buy electricity generated under feed-in-tariff — which covers smaller renewable power plants.

Currently, Strathmore University in Nairobi is the only institution that has connected its 0.6-megawatt solar power plant to the national grid.

Presently, KenGen has total power capacity of 1,631 megawatts, out of which half is hydropower (818 MW), geothermal (534 MW), followed by thermal (254 MW) and wind (25 MW).