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Power Generation
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T: +44 20 8204 4962 | F: +44 20 8206 2860 | E: info@platinumintegrations.com | W: www.platinumintegrations.com | 16 Freetrade House, Lowther Road, Stanmore, Middlesex HA7 1EP
The African Development Bank, European Investment Bank, Chinas Sinopec International Petroleum Company, the Canadian Department of Foreign Affairs and Trade, Daewoo as well as Chinas Fenxi Mining Group have all invested in Kenyas energy sector.
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T: +44 20 8204 4962 | F: +44 20 8206 2860 | E: info@platinumintegrations.com | W: www.platinumintegrations.com | 16 Freetrade House, Lowther Road, Stanmore, Middlesex HA7 1EP
well as work directly along side the government. In certain projects investors will be responsible for installing the power plant, financing, design and construction, operation and maintaining the power plant while the government will be responsible for drilling, resource development, management as well as feasible studies. Investors interested in renewable energy will benefit from Feed-in-tariffs (FiT) policy. This is reviewed periodically and guarantees priority purchases, transmissions and distribution of all electricity from renewable sources. This also provides fixed rates that dont exceed 0.12 US cents. Through its initiatives the Kenyan Government is committed to achieving its Millennium Development Goals (MDGs) specifically combating poverty through creating more jobs and developing the economy. Currently, the unemployment rate is 40% however with projects such as the Menengai Geothermal Development Project approximately 912 skilled and 300 unskilled jobs will be created.
The Vision 2030 is a long term plan and commitment by the Kenyan government to further develop the country, and is the back drop to the development in the energy sector. Through this initiative, Kenya aims to have its GDP growing at a rate of 10% per annum from 2012 to 2030 and the energy sector plays a huge role in achieving this goal. The Kenyan government have also encouraged private investments through Independent Power Producers (IPP). There are currently six IPPs that contribute to 30% of Kenyas generating capacity to the national grid. IPPs have the advantage of choosing and being involved in various sub sectors in the energy sector and they have the opportunity to be assigned more responsibility for projects they invest in as
Spoiled for choice! Investors have a variety of different energy sources to choose from in Kenya
The dominant energy source in Kenya is hydropower energy. The Mutonga site and the Lower Grand Falls are expected to have the capacity of 60 MW and 140 MW respectively. Other projects to be commissioned shortly include Magwagwa, Arror and Mwache, all which have a combined capacity of 284MW. Thermal power plants are popular private investments, specifically in developing coal handling facilities. There are several projects that are geared towards coal fired power plants. These include Mombasa power plant which has the capacity to generate 300 MW and the Mui Basin a 600MW plant. Once the Mui Basin power plant is completed, the Taru formation project will commence and is predicted to be completed in the next three years. The geothermal sector is becoming increasingly popular with private investors and IPPs because of its high availability, it is environmentally friendly and has a relatively low operating cost. Resources are concentrated in the Rift Valley and there is an estimated potential of approximately
Wind power generation is also becoming popular and the Lake Turkana Wind Power Project is expected to be the largest wind farm in Africa and will produce a total of 300 MW. This project is expected to be completed later this year and the energy supply should contribute to a total of 25% of Kenyas national energy.
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7 000 to 10 000MW. Currently the Menengai Geothermal Development Project is under way and was launched by the Africa Development Bank and Kenyas Geothermal Development Company (GDC). This project aims to produce electricity for 523 150 households as well as promote growth of businesses by providing approximately 333 737 small business with 1000GWh of electricity. This project alone will contribute to 26% of available electricity. For the time being the project is estimated to be completed by the end of 2016. Other geothermal projects occurring along the Rift Valley include the Olkaria project which is scheduled to be commissioned in 2013 and will result in a 280MW power plant, as well as the Bogoria-Silali block which could provide 3000MW of electricity and should be completed by 2023.
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Potential Risks
Economic Risk- investors could encounter problems such as increased fuel prices which could result in higher inflation rates. Fuel prices soared when power cuts in Kenya were rife in 2010 and 2011 due to the droughts, which ultimately affected the rain-fed hydropower supply. As a result, domestic and electrical tariffs were increased to $18 compared to $7 in other countries such as South Africa. The government have learnt from this situation and are further developing the geothermal sector which is not affected by the changes in climate. Business Risk- Another concern is increased transmission and expenditure costs as well as high maintenance costs. The private sector has grown slowly due to high capital costs, which involve the initial project set up and infrastructure development. To further engage the private sector, there has been a decrease in power purchase costs from Shs 20 516 million in 2010 to Shs20 214 million in 2011.
Conclusion
Kenya is an advantageous place to invest in due to its geographical positioning, it vast amount of resources and its politically stable power sharing government that is focused on further developing the economy through investing in agriculture, financial services and its energy sector. With so much to offer, its no wonder stakeholders are so interested in investing in Kenyas energy sector.
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