Full of activity: A review of developments in Kenya’s Energy Sector (Q1-2016)

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Co-authored by Angela Ogang

• The Royal Court of Jersey made a confiscation order in February 2016 to seize approximately USD 4.7 million and USD 540 thousand from Jersey-registered Windward Trading Ltd, which was owned by former Kenya Power and Lighting Company ((KPLC), now Kenya Power)) Chief Executive Samuel Gichuru after Windward pleaded guilty to four counts of money laundering between 1999 and 2001. The Attorney-General of Jersey expressed optimism that Kenyan authorities would conclude the ongoing extradition proceedings of Gichuru and former energy minister Chrysanthus Okemo so that they are handed over “to face money laundering charges in connection with Windward’s activities.”

• Kinangop Wind Park (KWP), which is owned by Norway’s Norfund and the African Infrastructure Investment Fund II (and managed by African Infrastructure Investment Managers), announced in February 2016 that development of its 60.8 MW wind farm would cease implementation after nearly two years of delays due to persistent civil unrest which ran down the funds available for the project. The pair had invested USD 66 million in equity, to cover project costs. In a statement, KWP said that local groups opposed to the project first caused construction to be halted in May 2014.

• In February 2016, New York Stock Exchange-listed Ormat Technologies announced that it had reached commercial operation of Plant 4 in the Olkaria III geothermal complex in Kenya, increasing the complex’s total generating capacity by 29 MW to 139 MW. The company said that Plant 4 will sell its electricity to Kenya Power under a 20-year power purchase agreement, which was amended in October 2015 to allow for the future increase in phases of capacity at Plant IV to 100 MW. Ormat brought the first phase of Plant I online in 2000 and the second phase in 2009.

• Kenya’s president, Uganda’s president and oil company executives met on 21st March 2016 to hold further discussions on a route for a proposed pipeline to transport the two countries’ oil. Resolving the route of the pipeline is crucial to helping oil companies involved in Uganda and Kenya to make final investment decisions on developing oilfields. However, the discussions were deferred to the technical teams of the two countries after President Uhuru Kenyatta and his Ugandan counterpart Yoweri Museveni failed to agree after a lengthy meeting. In March 2016, the Tanzanian and Ugandan governments announced that the pipeline would go via Tanzania to the port of Tanga and that Total had raised the funds it needed to finance it. After recent talks, however, both options still seemed to be on the table, along with a third route through southern Kenya that passes further from Somalia than the Lamu option. The two countries seem to concur that the least cost solution for construction of the pipeline remains the best option. The cost breakdown shows that the most expensive route is Hoima to Tanga, whose cap stands at about USD 5.5 billion, while a joint one with Kenya through the southern route will cost USD 4.4 billion. Kenya favours the northern route through Lokichar, which will cost USD 4.2 billion, because as part of the Lamu Port, South Sudan, Ethiopia Transport (LAPSSET) project, it would transform infrastructure and the way of life of the people in the towns and counties across its path. However, Total has raised security concerns about the Kenyan route because sections of the Kenyan pipeline could run near Somalia, from where militants have launched attacks on Kenya. It has recently emerged that Uganda is also uneasy about the Kenyan government’s ability to acquire the land needed for the pipeline. In March 2016, Kenya and Japan signed a KES 41 billion (USD 408 million) loan agreement that will go towards building a 140 MW geothermal power plant. The Olkaria V power plant will be built by Nairobi Securities Exchange-listed Kenya Electricity Generating Company (KenGen). Construction is expected to begin in July 2016, with the plant arriving on the grid by the end of 2018. The plant is part of KenGen’s plans to add 720 MW of electricity to the grid between this year and 2020, at a cost of just over USD 2 billion.

• The Lake Turkana Wind Power Project will face delays in supplying electricity to the grid when Africa’s largest wind farm goes live in October 2016 because transmission lines may not be in place, the company said. State-owned Kenya Electricity Transmission Co. Ltd has begun construction of the 428 kilometers of power lines. However, wayleave challenges in Nyahururu and upper Naivasha and security issues in Samburu are delaying completion. The developers of the 40,000-acre site in Marsabit county, northern Kenya, plan to have the first 90 turbines installed by September 2016 and begin generating power the following month. The Business Daily announced on 2nd March, 2016 that the first batch of turbines for the 310-megawatt Lake Turkana Wind Power Plant have arrived at the Mombasa port. The shipment of the 30 turbines lays the ground for the expected injection of the first 50 MW of wind power to the national grid in September 2016. UK-based company Aldwych International is the single largest investor in the KES 70 billion wind project with a 30.7% stake. Google has a 12.5% stake after pumping in KES 4 billion last October. Lake Turkana Wind Power Limited, the company developing the wind farm, will sell electricity to Kenya Power at KES 8.6 per unit under a 20-year power purchase agreement.

• Mkopa Investments, a Kenyan company has sued Safaricom, a leading mobile network operator in Kenya, M-Kopa Solar and its parent firm Mobile Ventures Kenya Limited, claiming the firms have infringed on the trade name it has owned since December 1997. Patrick Kimani Kamau, who owns Mkopa Investments, wants Safaricom and Mobile Ventures stopped from using the M-Kopa Solar name. The businessman also wants Safaricom and M-Kopa to pay him all profits they have made by using the disputed name in the course of business. However, Safaricom in its response says Kamau’s company did not raise an objection when Mobile Ventures registered M-Kopa Solar as a trademark, and that the businessman is simply trying to cash in on the multi-million shilling solar energy business. Furthermore, Safaricom says it is not in the same line of business with Mkopa Investments, which deals in import and export of leather, macadamia and groundnuts and that it has never passed itself off as Kamau’s firm. Safaricom in its filings reveals that it has made KES 314 million between 2012 and 2014 from its partnership with Mobile Ventures Kenya in the M-Kopa Solar project.

• The World Bank is seeking bids from consultants to help Kenya’s Ministry of Energy and Petroleum prepare a national geothermal strategy. According to the World Bank, Kenya has an estimated geothermal potential of between 7,000 MW and 10,000 MW. Geothermal is the country’s least-cost base load option. The current least-cost power development plan has set an ambitious target of over 5,000 MW by 2030 as part of Kenya’s Vision 2030 economic development program.

• A USD 2 billion coal-fired thermal power station is set to be constructed at the small village of Kwasasi in Lamu County. It will be Kenya’s first coal-powered plant and is expected to add 985 MW to the grid. However, the project has been opposed by community-based organizations, such as Save Lamu (a coalition of several community groups), whose concerns regarding the plant include environmental and health hazards. The county government’s head of health, sanitation and environment, Mohamed Abubakar, is hoping that an environmental and social impact assessment will lay out how Amu Power, a company formed by a consortium of Centum (a leading Kenyan investment company listed on the Nairobi Securities Exchange and the Uganda Securities Exchange) and Gulf Energy, will mitigate against the damaging effects of the plant.

• Kenya’s Geothermal Development Company is inviting bids for the provision of various services for the Menengai Geothermal Phase I project.

References

African leaders urge passage of Electrify Africa Act , The Hill

Aldwych International and Partners sign the Lake Turkana Wind Financing Agreements , Aldwych

Amu Power , Amu power

African infrastructure investment fund 2 , Old Mutual Investment Group

African Growth and Opportunity Act (AGOA) , International Trade Administration

Cement Sustainability Initiative (CSI), Cement Esia

Chinese firm CMEC to build Sh 30bn wind farm in Kenya , Kenya Business Review

China firm wins Sh22.6bn tender to build Kipeto wind power plant , Business Daily

Details of collapsed Kenya, Uganda pipeline talks emerge , Citizen TV

East Africa: Kenya Doubles Power Exports to Uganda, Tanzania , The East African

Google to invest Sh4bn in Lake Turkana Wind Power project , Daily Nation

Gichuru firm found guilty of graft , The Standard

Gesto signs contract for geothermal power plant with kengen , Gesto Energy Consulting

Inside Gichuru’s Sh20bn empire , Daily Nation

Japan loans Kenya Ksh 41 Billion towards KenGen’s Olkaria V Project , Kenyan Wall Street

Kenya and Uganda presidents to meet oil companies over crude pipeline , Reuters Africa

Kenya and Uganda stall on talks over oil pipeline route , Energy Global

KETRACO , Kenya Electricity Transmission Company

Lake Turkana Wind Power of Kenya Sees Electricity Supply Delayed , Bloomberg

Lake Turkana Wind Power receives first turbine shipment , Business Daily

Locals oppose plans to build first coal-fired power plant in Kenya , The Guardian

Menengai Geothermal Development Project , Climate investment Funds

Ormat Begins Commercial Operation of Plant 4 of Olkaria III Geothermal Project , Renewable Energy World

Ormat Announces Commercial Operation of Plant 4 in Olkaria III in Kenya, Expanding Complex Capacity to Nearly 140 MW , ORMAT

Sh15bn Kinangop wind park halted as land protests swirl , Business Daily

Sh15bn Kinangop wind farm succumbs to severe political headwinds , Construction

Safaricom drawn into dispute between solar firm and trader over M-Kopa name , Business Daily

Tenders , Geothermal development Company

The Overseas Private Investment Corporation , OPIC

US President Obama signs Africa electricity plan into law , BBC

UK now moves to seize Gichuru and Okemo hidden cash , Business Daily

World Bank request for EOI: consulting work on Kenya Geothermal Strategy , Think Geo Energy

Centum

Geothermal development Company

Gulf Energy

Kengen

Kenya Power

Lake Turkana Wind Power

Ministry of Energy and Petroleum 

M-Kopa Solar

Kenya Vision 2030

Millennium challenge corporation

Save Lamu

USAID

US Trade and Development Agency