Wednesday, 6 April 2011

Sh50 billion wind power project gets green light
27 March 2011

The government has signed a deal with Lake Turkana Wind Power Ltd for a Sh50 billion wind power project. This ends months of anxiety over the largest such project on the African continent. This follows Treasury permanent secretary Joseph Kinyua and the company's chairman Carlo Van Wageningen signing an agreement on the 300 MWs initiative.

Mr Kinyua said the deal is a culmination of a long process that has taken over a year in an effort to safeguard the taxpayers' interests. "There has been erroneous impression given in some sections of the media that the government was not willing to support investors in the energy sector", he said at Treasury building on Saturday. The agreement, otherwise known as a Letter of Support, provides two components.

The first is an assurance to the firm's lenders that the government will step in and help in case Kenya Power and Lighting Company is unable to buy the power generated. The other is that Independent Power Producers (IPPs) will obtain liquidity support through the International Development Association Partial Risk Guarantees while the termination and political risks will be covered by Multilateral Insurance Agency. Mr Kinyua said since the letter is not an explicit guarantee, the country's public debt statistics are not adversely impacted upon.

The PS said that the agreement is part of the government's commitment to attract private investment as well as a basis with which five other IPPs letters will be signed, soon. "It is not possible to meet the needs of the development agenda without looking for other innovative requirements from the private sector", he said. Mr Wageningen said they have raised Sh20 billion, representing 30% of the estimated project cost, arguing that lenders have shown positive response to support the project.

The project involves the construction of 365 wind turbines, each with a capacity to generate 850 kWs. "The ground breaking work is expected to start in October this year and the first generation of 50 MWs in September 2013", said Wageningen. By the end of 2014, the projected will provide an additional 300 MWs to the national grid. Part of the infrastructure development involves internal construction of the road network and internal transmission, within an area of 25,000 acres of land.

Energy permanent secretary Mr Patrick Nyoike said that unlike geothermal, wind power is reliable and continuous. "This is part of the transition expected and in 10 years, the private sector will not need the letters of support but come and invest", Mr Nyoike noted. He said investors would assess market macroeconomic dynamics before they invest, through a competitive market forces.