Funding Solution for Kenya's 300-Megawatt Wind Project May Lead to More Sustainable Project Progress

---

Researched by Industrial Info Resources (Sugar Land, Texas)--Bernard Osawa, the Director of Renewable Energy for Kenya's Energy Regulatory Commission, is looking for a breakthrough in funding problems that have held up the addition of 604 megawatts (MW) of wind and geothermal capacity. The crux of the problem is that independent power producers and developers have demanded payment guarantees to offset project risks. Osawa says that the project investors have been asking for too much, because the power purchase agreements are as good as guarantees. He believes that as soon as one investor accepts a power purchase agreement, other project backers will follow.

The IPPs are asking for irrevocable standby letters of credit to cover debt service, including recurring fuel- and non-fuel-related operating costs. The state-owned Kenya Power and Lighting Company and KenGen (both Nairobi) are unable to meet these demands.

One of the major projects which has been stalled is the 300-MW Lake Turkana wind project (Nairobi) in northwest Kenya, which will have 385 Vestas V 52 turbines of 850 kilowatts (kW) each installed. This will be Kenya's largest windfarm. The power output from the project would increase the current total installed national power capacity by more than 25%. In January this year, the government gave letters of support for the project from the Ministry of Finance, which means that the project could generate an initial 50 MW by the end of 2013, which would be 18 months later than the revised startup date of June 2012, and 24 months later than the originally proposed date.

Full operation of the 300-MW project is promised for mid-2014. The Lake Turkana wind project consortium consists of Kenyan and Dutch companies, and individual firms that include Anset Africa (Nairobi), a project development management company, and KP&P (The Netherlands), a wind project developer and operator.

The $778 million Lake Turkana wind project has been granted a 99-year lease agreement by the local Marsabit county council on 150,000 acres. The site takes full advantage of the Turkana low-level jet stream winds. A unique feature of the site is the venturi effect produced between Mount Kulal in the north and Mount Nyiru in the south, which accelerates the winds across the windfarm.

With the prospect of low rainfall continuing at least through the first half of 2011 and drastically reducing the generating capacity of hydropower plants, which nominally provide more than 60% of the country's installed capacity, KenGen has plans to generate 80 MW from thermal and diesel-fired projects. Gulf Power (Nairobi) will add 80 MW from thermal sources, and Iberafrica (Nairobi) will purchase 320,000 tons of heavy fuel oil to feed its 110-MW plant in the Nairobi to maintain power supplies for the next two years, after which the Lake Turkana wind project project should kick in at full operational power.

View Project Report - 200003197

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.