Friday, October 4, 2013

AfDB approves Sh2.36bn guarantee for wind farm

The African Development Bank has approved a €20 million (Sh2.36 billion) partial risk guarantee against possible construction delays of a transmission line for the Lake Turkana Wind Power project.
The 428km line (400kV double circuit) and associated electricity substations will be built from Loyangalani on Lake Turkana’s southeast, to Suswa on Narok/Kajiado counties border to connect the project to the national grid. The transmission line will include a fibre-optic cable, allowing internet penetration to the country’s interior.
The mega wind power project comes at a time when oil and huge deposits of water have been discovered in Turkana catapilting the arid zone into one of Kenya's counties with the highest economic potential.
The project is set to add 300 megawatts to the national grid by 2016, which is about 17 per cent of Kenya’s current capacity.
AfDB’s arm, the African Development Fund, will provide the guarantee which is its first, the bank said yesterday.
“The PRG (partial risk guarantee) will support the Kenyan Government’s on-time delivery of the transmission line and will reduce the risk of it being unable to meet payment obligations,” the AfDB said in a statement.
The private wind farm investment has a site of 40,000 acres, and is estimated to cost €600 million (Sh70.9 billion). It will have 365 turbines of 850 kilowatts each and a 33kV electrical network. The estimated average production at LTWP is 1,440 gigawatt-hours annually, which will be sold to Kenya Power at €0.0752/Kwh (Sh8.88/Kwh).
“The power produced will be bought at a fixed price by Kenya Power over a 20-year period in accordance with the signed power purchase agreement,” LTWP says on its website.
LTWP targets financial close late 2013 after the government signed a letter of support, allowing for lenders to complete their financial due diligence and documentation.
The wind power project is expected to reduce energy costs to consumers, boost electricity connections in rural Kenya, cut fossil fuel dependence and reduce carbon emissions.
The partial risk guarantee comes as a relief to the project after the World Bank pulled out late last year citing the skewed power purchase agreement between LTWP and Kenya Power, which commits consumers to paying for unused electricity.
This, the World Bank said, would beat the project’s primary objective of cutting down the cost of power. The bank also raised concern over Ketraco’s (Kenya Electricity Transmission Company) ability to complete construction of the power line in time, considering the past. Delay exposes Kenya Power to paying for electricity it has not supplied, and as usual, the vendor passes on the costs to consumer bills.