Spain gives giant Turkana Wind Power Project $150m funding

Lake Turkana Wind Power  Ltd — the largest wind power project in Africa and Kenya’s most ambitious green energy venture yet — has  just achieved a major breakthrough with the Spanish government stepping in with a $150 million (€110 million) offer to finance construction of the transmission line.

The entry of the Spaniards has come at a time when anxiety was beginning to grow over whether the massive project  would achieve financial closure.

African Development Bank, the financial arrangers of the project, had warned  the government that reaching financial closure on the 300MW wind farm would be difficult without a firm commitment that financing of the transmission line was fully funded.

The project will involve the construction of a 427-kilometre double circuit transmission line between Loiyangalani in Marsabit, northern Kenya, and the nearest point to the national grid at Suswa, approximately 100 kilometres from Nairobi.

The Lake Turkana Wind Power Project is significant to Kenya’s energy security because it will represent a fifth of Kenya’s existing capacity for generating electricity.

At 300 MW, it eclipses the 290MW of expensive electricity Kenya is currently buying from diesel-fired power plants under an emergency programme to bridge the country’s chronic power deficit.

Communication between Kenya’s Ministries of Finance and Energy and the Spanish government over the past one month indicates that the major milestones have been met to close the financing for the project.

Documents seen by The EastAfrican now show that the government of Spain last week wrote to the Treasury of Kenya with the Euro 110 million offer — half of  which will be on concessional terms with the remainder on commercial terms.

The specific details of the offer by the Spanish government are as follows: First, a concessional loan of €55 million ($74 million) at an interest of 0.10 per cent, with a repayment period of 35 years, including a 14-year grace period.

This loan will be supported by a Financial Co-operation Agreement between Kenya’s Ministry of Finance and Spain’s Ministry of Industry, Tourism and Trade.

Second, a €55 million commercial credit with official support from the Spanish Export Credit Insurance Company will be extended on OECD terms.

Third, there will be a sovereign guarantee by the Kenyan government.

Way leave

The local costs of the project, including acquisition of the way leave, will be met by the government through the Ministry of Energy.

The Spanish government has also indicated that the offer may be improved if the government of Spain is granted a preferential price regarding the Certificates of Emission Reduction (CERs) generated by the massive wind farm.