French loan agreement to finance first phase of Kenyan wind farm

The Kenya Electricity Generating Company (KenGen) said it expects to sign the agreement in August, which will provide “underpinning funding” for the first phase of the Meru wind farm and construction of an initial 80 MW of generating capacity.

KenGen signed a memorandum of understanding for the financing arrangement with the AFD in Paris last April. The facility will be built around 25 kilometres north of the town of Meru.

KenGen said the project “is embedded in KenGen’s expansion strategy to meet Kenya’s rising demand and bring down the cost of electricity by focusing on clean and renewable sources”.

“The project will contribute to a sustainable national energy matrix by producing environmentally sound electrical energy and avoiding the generation of carbon emissions at reasonable economic costs,” said KenGen's chief executive officer and managing director Albert Mugo.

KenGen said the AFD loan will also help finance associated infrastructure including a 20-kilometre long overhead transmission line connecting the wind farm to an electricity sub-station, which is being commissioned. The project includes warranty, operation and maintenance of all the facilities for a two-year period, KenGen said.

Helen Bone of Pinsent Masons, the law firm behind Out-Law.com, said: “Wind energy, given the intermittent nature of its output, can’t address Kenya’s rising demand for electricity alone. However, the Meru wind project, which is expected to export 80 MW into Kenya’s national grid, would complement KenGen’s other electricity generation sources.” 

Kenya’s government announced plans for the wind farm last August. The government said the plant would be built by a privately-owned Kenyan energy company, Maralal Energy Limited, at a total project cost of 4.5 billion Kenyan shillings ($44.5m).

In addition to wind, Kenya is also investing in geothermal power. KenGen has said that “at 7.2 US cents per kilowatt hour, geothermal energy is among the cheapest renewable sources of electricity in the country and the world”. KenGen said in 2015 that electricity production in the country from hydropower had been “relegated to second place” at 36%, which was largely due to lower levels of rainfall.

The World Bank said last year that the contribution of geothermal power to Kenya’s national energy needs had reached 51%, following the commissioning of the final phase of a combined 280 MW electricity generating plant.

World Bank country director for Kenya, Diarietou Gaye, said the bank’s support for the Olkaria plant in the Rift Valley was “a key infrastructure investment in one of the largest single geothermal investment projects in the world”.

Access to finance was identified as “critical” to boosting growth and regional competitiveness in the World Bank’s Country Partnership Strategy for Kenya for 2014-18 and the government’s ‘Vision 2030’ priorities, which includes “development investments in more and better quality infrastructure”.

A report published last August, based on research by the UK Department for International Development’s impact programme, said a total of $9.3bn in ‘impact-investment’ funds had flowed into East Africa over the past five years, with almost half of that amount being disbursed in Kenya. The report said the investments in Kenya exceeded $650m in that period.