A three-company consortium led by Japanese firm Mitsubishi Corporation has won the tender to construct KenGen’s new 140 megawatt (MW) Olkaria V geothermal power plant in Naivasha.
The firm said in a statement that it will partner with fellow Japanese company Mitsubishi Hitachi Power Systems (MHPS) and Kenyan firm H Young & Co (HY) in the $555 million (Sh57.4 billion) project that is expected to be completed in 2019.
KenGen is looking to put up two units of 70MW each on the Olkaria site, which when completed will grow its current steam capacity of 533.8MW by a quarter.
“Mitsubishi Corporation will be responsible for supplying the plant’s main equipment, while MHPS will handle in-land transportation and installation. HY, a Kenya-based engineering and construction company, will supply the remaining components needed for plant construction, as well as conduct civil engineering and installation works. The construction is scheduled for completion in 2019,” said Mitsubishi in statement.
The plant is being financed mainly through a loan of ¥45.7 billion (Sh40 billion) provided by the Japan International Cooperation Agency (JICA).
KenGen has also directed some of the proceeds of its Sh26.5 billion rights issue towards the project. Minority shareholders raised Sh6.35 billion in the issue, with the government converting Sh20.15 billion worth of debt to equity.
The firm has also sold a 5.33 per cent stake to South Africa’s pension fund, Public Investment Corporation (PIC), for Sh2.3 billion.
The two Japanese firms have been working together to build geothermal power plants in Kenya since the 1980s.
MHPS has already supplied six sets of power generating equipment for the Olkaria I and II geothermal power plants with 150 MW total output.
Other Japanese firms that recently won tenders to put up geothermal plants at Olkaria include Toyota Tsusho and Toshiba.
Toyota Tsusho, in partnership with Korean firm Hyundai Engineering in 2015 completed the construction of KenGen’s Olkaria I and IV which have a combined output of 280 MW.
Turbines and generators for the plant were supplied by Toshiba Corporation.
KenGen also plans to build an additional 70MW steam power plant at Olkaria I.
Three multilateral lenders, including the European Investment Bank, JICA, and German Reconstruction Bank have agreed to fund the $314 million (Sh31.4 billion) project.
The government is racing to meet an ambitious target it set for itself in 2013 to grow the installed power capacity from 1,708 MW to 6,708 MW to spur industrial growth and light more homes.
The target date for the additional 5000 MW was this year, but it is unlikely that it will be met.
Given projections of a sharp increase in energy demand, the Vision 2030 National Development Policy includes targets for expanding energy generation capacity to 18,000 MW by 2030.
KenGen is focusing on building new geothermal plants and expanding the output of existing facilities. Other Japanese firms expected to bid for similar deals include Marubeni and Fuji Electric.
Toyota Tsusho and KenGen are currently planning feasibility studies for geothermal installations beyond Olkaria.