IFC to inject Sh4.3bn into power production

The International Finance Corporation will invest a total of Sh4.34 billion in an 80 megawatt (MW) thermal power plant near Nairobi, boosting the country’s bid to meet it energy needs.

The World Bank’s private sector lending arm said it will invest Sh2.17 billion (€20.7 million) in the power plant owned by independent power producer (IPP), Gulf Power Ltd and arrange for a loan for an equal amount from Standard Bank.

“The 80 megawatt Gulf Power plant will use heavy fuel oil (HFO), to help diversify Kenya’s electricity production from hydro-power.

During drought, when water levels drop in generation dams, Kenya has had to turn to costly emergency power.

HFO power plants are a quick and viable option to address the energy deficit in Kenya, because of the relatively long development period of other sources like geothermal energy and coal,” IFC said in a statement.

The project is a result of the Kenyan government’s tender of three power plants in 2009, to encourage private sector participation in the electricity generation.

The World Bank estimates that power shortages currently cost the Kenyan economy two per cent of GDP growth.

“As demand for energy increases in Kenya, IPP’s can help the government boost electricity supply and fuel the nation’s economy. Gulf Power’s choice of heavy fuel oils will diversify Kenya’s energy sources, making power generation more stable,” said Oumar Seydi, IFC Director for East and Southern Africa.

Gulf Power is owned by Gulf Energy Limited, an oil and gas trading company, and by Noora Power Limited. Both companies are incorporated in Kenya.

“Independent Power Plants can assist governments in improving supply and quality,” said Francis Njogu, CEO of Gulf Energy Ltd.

In June, the IFC also put in Sh3 billion in another winning bidder for the IPPs — Thika Power Ltd which has put up a 95MW thermal plant.

With increasingly unreliable rainfall due to the effects of climate change, the country is often forced to take to thermal power sources to compensate for shortfalls on hydro-power out put.

The country is also taking on alternative sources of energy such as geothermal, wind and coal to boost electricity supply following growing demand.

Statistics by the Energy Regulatory Commission (ERC) showed that the demand for electricity in the country has grown tremendously over the years piling pressure on generation and distribution.

While the demand was 4,200gega watt hours (GWh) in 2004/05 it increased to 5,318GWh in the year 2009/10.

The country is stepping up geothermal production to improve supplies and cut its energy costs.

The country has potential to produce 7,000 MW of power from geothermal and is targeting at least 5,000 MW by 2030.

Several wind power projects have also been rolled out including those by Kenya Electricity Generating Company (KenGen) in Ngong area.

Statistics by the Energy ministry showed that the installed wind energy capacity to the grid was 5.45MW as at December 2011 and a further 20MW is expected to be commissioned by end of 2012.

The 300MW Lake Turkana Wind power project is expected to be commissioned in 2014. Other committed projects include 110MW at Kinangop and Ngong. As of 2011, proposals for development of 650MW have been received for wind energy production in Marsabit, Isiolo and Ngong.