State woos private investors to spur power generation

Private power producers are being wooed in a bid to cut the country’s reliance on electricity produced by the Kenya Electricity Generating Company, or KenGen.

The Energy ministry has announced that Independent Power Producers will be given priority in a plan to add 5,000 megawatts to the national grid in the next 40 months.

Kenya generates about 1,600 megawatts of which 1,300 megawatts are generated by KenGen. Energy Secretary Davis Chirchir says the independent producers will permit negotiation of favourable power purchase prices that will lead to a reduction in the cost of electricity.

By shifting to cheaper sources of energy like geothermal, wind and coal, the government plans to cut the cost of power by at least 25 per cent.

“Low electricity prices will make Kenya more attractive as an investment destination for both local and international investors,” according to a Cabinet brief released on Thursday.

The Energy ministry has already invited bids for power generation in the Coast using coal and natural gas. According to a tender notice issued a week ago, the companies will be expected to construct power plants, own and operate them before the assets are eventually transferred to the government when all the capital incurred in setting up is recovered.

TENDER NOTICE

“The development will be based on a Build, Own and Operate or Build, Own, Operate and Transfer framework, where the transfer would be done after full amortisation of the capital investment,” read the tender notice. Independent producers are already in the country. IberAfrica, Rabai Power and Tsavo Power have been generating thermal electricity that is incorporated into the national grid.

Other producers are Aeolus Kenya and OrPower that plan to generate electricity from wind and geothermal.

Construction of Thika Power Limited, Gulf Power and Triumph Generating Company is underway. Construction of the three thermal power plants was delayed for more than two years because investors were unable to secure government guarantees.

Another independent producer, Lake Turkana Wind Power Company, recently received a guarantee for its investment from the African Development Bank to set up a 300 megawatt wind power plant in Turkana.

The plant, the largest single wind power project in Africa, will cost more than $700 million.

Mr Chirchir says government wants to accelerate development of geothermal power by inviting private investors. The investors will be allocated land for exploration.

“We will give greenfields to investors to harness steam which will increase power generation,” he said. Kenyans pay $0.14 cents per unit of power; the government intends to cut this cost to a maximum of $o.9 cents.