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KenGen to cede 75pc in geothermal venture

Olkaria V
A power substation under construction at Olkaria V in 2018. PHOTO | SALATON NJAU | NMG 

State-owned electricity producer Kenya Electricity Generating Company (KenGen) #ticker:KEGN is seeking a joint venture (JV) with an external investor as it looks to raise the stock of green energy.

KenGen, which has a 1,796.4 megawatt annual capacity and supplies 75 percent of the Kenya’s electricity, said the successful firm will enter into a joint venture with KenGen and create a special purpose vehicle (SPV) to finance and develop a 140 megawatt (MW) geothermal plant in Olkaria, Naivasha. The firm will have a majority 75 percent stake.

“KenGen has drilled and tested all production wells required for the project and will be responsible for the operation, maintenance, and management of steam supply to the project,” said KenGen. “KenGen will be a shareholder in the SPV with a shareholding of 25 percent.”

“The SPV will be responsible for the development, design, financing, construction, operation and maintenance of the project.”

The power firm said it will also enter into a long-term power purchase agreement (PPA) with Kenya Power as off-taker.

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“KenGen will enter into a long-term steam supply agreement with the SPV through which the project will purchase steam from KenGen,” it said.

MEGA PROJECTS

The plans come at a time mega electricity generation projects valued at billions of shillings are in limbo after distributor Kenya Power indefinitely froze the signing of new power purchase agreements (PPAs), citing financial constraints and excess capacity. Kenya Power chairman Mahboub Maalim Mohamed early this year said the monopoly would not sign new PPAs pending a sector review intended to establish the country’s additional demand for energy.

Mr Mohamed said electricity generation has overshot Kenya Power absorption capacity, hence the need for a moratorium on any new projects. The decision meant investors lining up energy projects could be left in limbo with billions of dollars of investments getting stuck until the freeze is lifted.

“There's an excess capacity of power generation right now in Kenya,” said Mr Mohamed in an interview.

The government in 2013 set an ambitious plan to install an additional 5,000MW to the national grid by 2017 from renewable sources such as geothermal, solar and wind farms with a target to connect all homes to power by next year. Kenya Power has 23 PPA applications under consideration with a generation capacity of 2,240.5 megawatts.

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