Electricity consumers in Kenya will have to pay some $52.5 million paid by the government to Lake Turkana Wind Power (LTWP) for the failure by Kenya Electricity Transmission Company (Ketraco) to complete a major transmission line on time.
The contract between the Kenyan government and LTWP had imposed fines on the government if the transmission line was not ready by the time the wind farm was completed.
Following the payment by the government, electricity consumers will have to incur an extra Ksh0.96 per kilowatt hour to enable the government recover the amount over a period of six years.
Ketraco failed to complete construction of the $150 million Loiyangalani-Suswa power line on schedule.
LTWP confirmed it was paid $52.5 million to enable it to meet its financial obligations to the funders of the $800 million wind farm that will have a capacity to generate 310MW and which is the biggest in Africa.
Shareholders also had to inject $92.5 million to enable the company to repay $145 million, which had fallen due last year, to funders.
In June, Energy principal secretary Joseph Njoroge said the government would not pay the deemed charges.
“We are not paying any fines. We negotiated with the investors and delayed the commencement of the commercial operating date and settled on August 31,” he said.
But, LTWP director Rizwan Fazal said putting together the financing component of the complex project, which was completed in January 2017, would have been impossible without assured receivables, meaning the Kenyan government committed to the deem generated payments.
“Our obligation was to deliver the power plant in time and we did. It was not prudent to renegotiate with lenders particularly because of the need to show that Kenya and Africa are right for investments,” he said.
Mr Fazal added that trying to renegotiate the loan repayment schedule would have impacted Kenya’s credit rating, considering the project was financed by a consortium of lenders, including the European Investment Bank, the African Development Bank and Standard Bank of South Africa.
Ketraco managing director Fernandes Barasa blamed the construction delays on Spanish firm Isolux Ingeneria SA — the original contractor — filing bankruptcy.
This forced the company to bring on board a consortium of Chinese companies, NARI Group Corporation and Power China Guizhou Engineering Company, to complete the project.
Isolux cited financial problems emanating from over-exposure due to massive investments abroad, a situation that affected the Kenyan project because the company could not secure funds to complete it.
With the completion of the line in September, LTWP has now started injecting electricity to the national grid. Already, about 293 turbines out of the 365 turbines have been hot commissioned and the company is targeting to complete the process by end of October.
LTWP, which has signed a 20-year power purchase agreement with Kenya Power, will sell electricity at a rate of 9.740 US cents per kilowatt hour for the first six years. After six years, the rate will decrease to 8.775 US cents per kilowatt hour for 14 years.