AfDB facilitates energy diversification in Kenya
The Board of Directors of the African Development Bank (AfDB) approved €115 million in financing for a wind power project in Kenya’s Lake Turkana region. The project will add 300MW to power generation capacity and will benefit Kenya by providing clean and affordable energy that will reduce the overall energy cost to end consumers. Furthermore, the project will allow the landlocked Great Rift Valley region to be connected to the rest of the country through the improved infrastructure linked to the wind farm, including a road, fiber-optic cable and electrification.
The Lake Turkana Wind Power Project includes the construction and operation of a 300 MW wind farm with 365 turbines of 850KW capacity each. This zero-emission project will contribute in filling the energy gap in the country, enhancing energy diversification and saving 16,000,000 tons of CO2 emissions compared to a fossil fuel fired power plant. The project will be implemented by Lake Turkana Wind Power, a special purpose vehicle, created in September 2006. The group of investors includes Kemperman Paardekooper & Partners Africa, Aldwych International Ltd., the Investment Fund for Developing Countries of Denmark, Norfund, and Vestas Wind Systems AS.
But none of this would be possible without the commitment of the Government of Kenya. Catalytic to this investment is the fact that the Government of Kenya will construct the 428-km transmission line required to evacuate power from the project site to the national grid. To this end, the Government of Kenya has secured financing from the Spanish Government.
The AfDB has taken a lead role in developing what will be the largest wind power project in Africa. Spearheading the project’s transactions, the Bank built the confidence of potential investors on mitigation of environmental and governance risks, ultimately attracting additional investors in the project such as commercial banks. As the Mandated Lead Arranger for the project, AfDB will raise over €127 million in senior debt and a further €58 million of subordinated debt. Following Board approval, the Bank will officially launch the project to the public and hold a series of presentations for potential lenders this upcoming May. As requested by the Government of Kenya, the Bank will provide a partial risk guarantee to protect the project against the risk of delays in the construction of the transmission line, thereby providing additional comfort to prospective lenders.
The Lake Turkana Wind Project will enable the country to substitute generation of clean and low cost energy from more expensive plants operating on imported diesel and fuel oil. In addition, the Project-related investments will increase employment of local labour during the construction phase and upgrade the rural road network, significantly improving access to markets and business opportunities for the local communities, thus catalyzing additional jobs and income-generation opportunities in this poor and remote area. Moreover, the Project’s Corporate Social Responsibility Program will support investments in the local health facilities, potable water supply and school buildings.
The project will complement other transactions currently underway, which are also supported by the AfDB, including Thika Thermal Project and Menengai Geothermal Power. Building on its integrated approach to infrastructure development, the Bank’s ultimate aim is to establish Kenya, in particular and East Africa, in general, as an ideal place for business and investment through adequate energy supply capabilities.
Image Source: www.theeastafrican.co.ke
Source: African Development Bank