Chinese firm lends Kenya Sh25bn to electrify SGR

Kenya Railways Corporation MD Atanas Maina (left) and Ketraco managing director Fernandes Barasa. PHOTOS | FILE | NMG
Kenya Railways Corporation MD Atanas Maina (left) and Ketraco managing director Fernandes Barasa. PHOTOS | FILE | NMG 

Kenya has signed a $240 million (Sh24.4 billion) loan to electrify the standard gauge railway (SGR) in a move that is expected to push it up to scale with rival lines being built in neighbouring Tanzania and Ethiopia.

Money for the upgrade, which has been sourced from a Chinese company, is being funnelled through the Kenya Electricity Transmission Company Limited (Ketraco).

Ketraco says in an opinion piece published elsewhere in this newspaper that it signed the financing deal with China Electric Power Equipment and Technology Company Limited (CET), a Chinese government-owned multinational on January 25, paving the way for work to begin.

“Ketraco signed a contract worth $240 million with China Electric Power Equipment and Technology Company Limited (CET) on January 25, 2018,” the parastatal’s managing director Fernandes Barasa says in the opinion piece.


Higher costs

The deal is expected to further raise the cost of building the modern railway, which is already above the global average.

The announcement comes days after Kenya Railways managing director Atanas Maina said the government does not have the resources to transform the railway from diesel to electricity.

Mr Maina yesterday, however, walked back his earlier statements, saying his doubts were related to high-speed electric trains.

“We have not dropped plans for the electrification of the SGR line. What I was referring to is the country’s inability to operate high speed railway like the ones we have in developed nations such as China, Germany and UK,” Mr Maina said.

Ketraco says it will use the money to build 14 substations between Mombasa and Nairobi, adding that the main goal of the project is to have the railway run on clean energy and further reduce transport cost.

The electricity will also spur growth of factories, businesses and urban centres along the railway line, Ketraco added.

“The design of the SGR, initially run by diesel-powered locomotives, allows for addition of a single electric line that will be connected to Ketraco’s 482 kilometre 400kV Mombasa-Nairobi transmission line,” the agency said.

The transmission line, billed as the longest and highest voltage transmission infrastructure in East Africa, has a transfer capacity of 1,500 megawatts (MW) which is 200MW shy of the current national demand of 1,700MW.

'Solves challenges'

Mr Barasa says the transmission line solves the challenges of low voltages, high transmission losses and unreliable supply.

“Its energization therefore debunks as flawed the myth that Kenya does not have a dependable source of electricity, most importantly one that can power the electric train network,” Mr Barasa said.

The surprise change of plan also means Kenya will spend more money to upgrade the second phase of the railway running from Nairobi to Malaba border to electric status.

The government has spent a total of Sh447 billion on the diesel-powered Mombasa-Nairobi 472 kilometre line alone, significantly higher than the cost of Ethiopia’s 750 kilometre electric line, which has been built at a cost of $3.4 billion (Sh346 billion).

Kenyan authorities have argued that Ethiopia’s project is not comparable to Kenya’s, which comes with extra infrastructure to navigate a tougher terrain besides spending large amounts of money to compensate landowners.

He added that he is cognisant of the criticism of the railway’s electrification, including its economic viability. He says the project’s benefits will far outstrip its costs, with a further reduction in transport/travel costs and increased speeds.

He did not specify the new speed the railway will be able to achieve running on electricity. On diesel, it is currently hitting 120 km/h for passenger trains and 80 km/h for freight trains.

The move to electrify the railway comes at a time when it is struggling to fill its freight wagons, with cargo transport seen as the division that will be critical in supporting the mega project that was built on debt.

Fares for passengers will be hiked from April as the railway races to break even. The base fare, for instance, will rise from Sh700 to Sh1,200.