Kenya to soon vet shortlisted power generating firms

Saturday January 11 2014

Investors have shown interest in investing in LPG in Kenya. Photo/File

Investors have shown interest in investing in LPG in Kenya. Photo/File 

By PETERSON THIONG’O The EastAfrican

Kenya will this week invite shortlisted companies to submit proposals on how they intend to finance and operate the first coal and gas-fueled plants.

The country’s energy ministry said it had shortlisted 22 companies out of the 60 that had expressed interest in developing either a 900MW coal-fueled power plant or a 700MW liquefied natural gas (LNG) plant. Ten of the shortlisted firms expressed interest in the coal plant while 12 showed interest in the gas plant.

“Most of these firms are consortia. We intend to give them till March to come up with the proposals,” said Davis Chirchir, the Energy Cabinet Secretary.

“These projects will come into operation within the next 26 months from today (January),” said Joseph Njoroge, the Principal Secretary in the ministry.

The two projects are part of a bigger ambitious project by the country to add 5,000MW of power onto the grid in the next three years. 

Currently, the country has an installed capacity of 1,700MW, though, due to system losses only 1,357MW is available, against the optimum capacity of 2,236MW, which takes into account the globally recommended reserve margin of 30 per cent.

In the next 40 months the country plans to add 1,600MW from geothermal sources, 1,920MW from coal-powered plants, 420MW from hydro, 650MW from wind and 700MW from the liquefied natural gas plant at Dongo Kundu in Mombasa.

The country projects it will need to spend $17.5 billion over the next 40 months to deliver on the added capacity.

According to estimates by the ministry, the bulk of the new power capacity will be used by the Iron and Steel industry (2,000MW), Standard Gauge Railway 1,171MW, ICT parks 675MW and Lapsset 350MW.

Mr Chirchir said that Kenya is negotiating with Qatar for a government-to-government deal that will allow Nairobi to purchase natural gas at concessional prices and make it available to the independent power producer, who will then run the proposed 700MW liquefied natural gas plant.

Kenyan manufacturers have for long complained of the high cost of power, which is estimated to be double the rate in Egypt, arguing that this was eroding Kenya’s competitiveness.

On average, Kenyan consumers pay $0.18 per kilowatt hour, and manufacturers want this brought down to $0.08 per kilowatt hour to enable them have a fighting chance against companies in South Africa and Egypt.

The high costs due to overdependence on hydro and thermal power plants collectively contribute over half of the country’s electricity needs.  Hydro is not reliable and thermal costs are expensive averaging between US cents 26 and 36.

The bulk of the additional power will be taken up by steel industries, electric railway, cement factories and other manufacturing entities. 

The biggest challenge for the planned additional 5,000MW remains financing as the projected cost of $27 billion is about two thirds of Kenya’s GDP and one and a half times the country’s annual spending.

The government targets a mix of debt and equity to finance the projects with the country specifically eyeing funding from China. Kenya is also counting on increased private public partnership in the sector to drive new projects.

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