IFC syndicated loan to finance Kenyan hydropower plants project

IFC’s $55 million loan will also support the operation and maintenance of the plants, which will have a combined installed generating capacity of 16 megawatts (MW).

The IFC said the plants, which will take two to three years to complete, will provide “captive power generation” for the factories of Kenya Tea “and any energy excess will be sold to the state-owned Kenya Power and Lighting Company”.

“The project is being developed by the KTDA Power Company Limited – a wholly-owned subsidiary of long-term IFC client Kenya Tea Development Agency Holding Limited (KTDA),” the IFC said. “KTDA produces 60% of Kenya’s tea and provides income for over 560,000 small farmers who are also shareholders.”

“Investments in new technology can’t make Kenyan tea any tastier, but they can help boost production and farmers’ earnings,” the IFC said. “Cutting the cost of power will result in significant savings for tea factories, increasing financial benefits to 350,000 smallholder tea farmers, while also reducing the industry’s carbon footprint.”

The IFC said as energy “represents about 30% of factory production costs, lower processing costs will make KTDA more competitive and increase tea prices paid to farmers as these are linked to processing costs”. Excess profit will go to the farmers as dividends, the IFC said.

Once the project is complete, it will show that “that such ventures among indigenous power project companies are feasible – possibly stimulating new investments in the area and deepening the renewable-energy market in Kenya”, the IFC said.

A recent IFC study said the potential for investments in clean energy infrastructure projects in sub-Saharan African (SSA) is nearly $783 billion up to 2030.

The IFC said its study (140-page / 18 MB PDF), which looked at national climate-change commitments and underlying policies of 21 emerging-market economies following the “historic global agreement on climate change adopted in Paris last year, identified “sectors in each region where the potential for investment is greatest”.

In SSA, the study singled out Cote d’Ivoire, Kenya, Nigeria and South Africa as four ‘profile’ countries for clean energy investment potential in renewable energy generation, valued at $123bn, and buildings and transportation ($652bn).

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”.