Funding for PPP geothermal project in Kenya

20 April 2012 – The African Development Bank (AfDB) has provided US$143 million as a loan, in addition to a grant of US$17.2 million, for the development of the first phase of what is aimed to be a 400 MW geothermal power station in the Menengai steam field. This plant, which targets connection to the grid as early as 2016, represents a public private partnership (PPP) project. Overall the Menengai field has the potential to generate 1,600 MW of power.

Exploration has shown Kenya’s geothermal potential to be over 7,000 MW and the country’s government has a target of having 5,000 MW of geothermal capacity attached to the grid by 2030. Currently the country, which leads in Africa in terms of geothermal power development, has the Olkaria I, II, III and IV plants in place. This totals some 209 MW of existing capacity, which shows how the Menengai project represents a significant step up in realising the country’s geothermal ambitions.

AfDB East African regional director Gabriel Negatu says that the funds extended to Kenya will in part finance procurement of a modular power plant to supply power to six geothermal drilling rigs. The loan by the AfDB represents a pilot project on how governments in Africa can leverage and tap innovative financing mechanisms to develop capital intensive geothermal power. The total cost of the Menengai project is expected to be US$24 billion, with mechanisms to source funding for this still being investigated.

A second phase of the Menengai field is also under discussion, this phase comprising an 800 MW plant. Menengai is the first geothermal field being developed by Kenya’s state owned Geothermal Development Company (GDC) on its own. GDC will develop the steam field and then sell on to independent power producer (IPP) developers. A total of 19 international and Kenyan developers have been shortlisted, including Kenya Electricity Generating Company (KenGen). Four concessions of 100 MW will be awarded to different companies on this list.

The country is eager to pursue geothermal power, because after hydroelectric power, geothermal energy has been identified as the second cheapest energy form in Kenya.

The AfDB has also provided US$78.7 million to finance the construction of the Mombasa –Nairobi transmission line.

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