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Loan deal aids ‘acceleration’ of power supply programme in Kenya

Out-Law News | 26 Aug 2014 | 3:07 pm | 1 min. read

Kenya Power said the award of a $150 million loan from the African Development Bank will finance part of a programme designed to connect electricity supplies to a total of one million businesses and homes in the country.

The loan, announced on 25 August, is the first phase of a financing package from the bank that will cover connection costs for around 400,000 customers this year, Kenya’s principal secretary for energy and petroleum Joseph Njoroge said.

Kenya Power managing director and chief executive officer Ben Chumo said the company is “accelerating” the rate of connections, following a record 443,000 power supply connections in 2013, which he said was an increase of 307,000 from the previous year.

Chumo said the utility is working closely with Kenya’s energy ministry and financial institutions “to ensure allocation of adequate resources”, in line with infrastructure plans to increase Kenya’s overall domestic electricity generating capacity by 5,000 megawatts (MW) by 2016. The government also wants to achieve a level of 70% electricity penetration by the year 2020, compared to 32% at present.

Chumo said separate agreements signed with Kenya’s Jamii Bora Bank, Equity Bank and the National Bank of Kenya will help develop “appropriate loan facilities” to assist potential customers in paying for new connections where necessary.

Earlier this month, Njoroge and Chumo attended a ceremony to mark the $1.8m upgrade of the World Bank-backed Athi River power plant project, in eastern Kenya, which is designed to stabilise power supplies to customers in Nairobi’s rapidly growing satellite towns.

Kenya’s government aims to increase infrastructure partnerships with private investors to boost generating capacity. It is envisaged that this capacity will be made up of natural gas-fired plants (1,050 MW), geothermal (1,646 MW), wind (630 MW) and coal (1,920 MW).

Power generation in Kenya has been liberalised since 1996. According to the country’s energy ministry, independent power producers contribute about a third of the country’s domestic generating capacity, which currently stands at just over 1,600 MW and comprises hydro (770 MW), geothermal (241 MW), thermal (622 MW), co-generation (26MW) and wind (5MW). The maximum recorded demand is around 1,410 MW, while the ministry said actual demand is estimated at 1,700 MW, which is a shortfall of 536 MW after provision of a 30% reserve margin.

In July 2014, Kenya Power announced that it will receive €30m from the French Development Agency and the European Union under a loan agreement to assist the utility’s electricity connections programme over the next four years.

Earlier this month, the World Bank Group committed $5 billion in new technical and financial support for energy projects in six African countries, including Kenya, which have partnered with US president Barack Obama’s Power Africa initiative.