Graft claims at Geothermal Development Company holding back cheap power, Energy Cabinet Secretary Davis Chirchir now warns

A Geothermal Development Company steam well in Menengai, Nakuru County. The company has laid ground for independent power producers to begin generation of 105 mega watts from the 11 steam wells. [PHOTO: KIPSANG JOSEPH]

Huge volumes of investment amounting to billions of shillings by the Geothermal Development Company (GDC) may be fueling claims of corruption at the State agency.

Last week, Energy and Petroleum Cabinet Secretary Davis Chirchir told MPs that allegations of corruption in procurement deals in GDC may hurt the long term goal of producing cheaper power.

Mr Chirchir said continuous claims of corruption for the last two years erode investor confidence, adding that it paints an image of a country unable to contain corruption. These perceptions, he noted, undermines investor confidence. “When corruption allegations are made against GDC, they are of concern not only to me but also investors,” Chirchir said.

“The same have been made against the executive, the judiciary and even this parliament. However, as you know the Constitution has created bodies charged with investigations and prosecutions and I will really urge for a speedy probe to address these perceptions.”

His remarks are informed by the claims of scandals that have rocked GDC - the main vehicle hooking Kenya to affordable, reliable and green energy. Both donors and the Government have been pumping in billions of shillings into the parastatal. GDC has an estimated 540MW of steam with an asset base of about Sh60 billion. This financial year, the parastatal was allocated Sh10 billion and is seeking an extra Sh20 billion from the Treasury to finance its operations. The agency is set to commence generating its own income when power producers such as KenGen start paying for the steam. In Olkaria, GDC has steam of 410MW from 59 wells which are under KenGen. Part of the steam in Olkaria has been converted into 280MW of electricity while an additional 129MW worth of steam is still available for electricity generation.

The State agency has contracted three private investors to build power plants, each with a capacity of 35MW in the Menengai geothermal project to generate 105MW of electricity using GDC’s steam.

Recently, power agency handed power generation sites to three Independent Power Producers (IPP) Power Twenty Two, Quantum and Sosian Energy, which will see each of the firms install 35MW power plants by the end of 2015.

Drilling rigs

However the acquisition of the three rigs for Menengai have been part of a long controversy that threatens to break operations of the parastatal. In 2012, AfDB granted GDC a loan to purchase two drilling rigs. GDC engaged in international tender for supply of the rigs. GDC Managing Director Silas Simiyu said the lowest evaluated bidder, quoted a price that could buy three rigs instead of two, prompting GDC to seek clearance to buy a third rig instead of the money going back to AfDB.

It is the purchase of the third rig that has generated heat with claims that GDC did not follow the set guidelines. The parastatal however argues it followed the law. “Everything was above board. We followed the process both of the Government and the financier. The records are there for all to see,” Simiyu told MPs.

Company model

Dr Simiyu explained that to attain 5,000MW, Kenya needs at least 12 rigs from the current seven. He said owning rigs cuts the cost of drilling by 50 per cent and also provides employment to Kenyans as opposed to hiring rigs where the contractor brings in expatriates to work.

Already, the firm has drilled steam wells with an output of 120MW. “Menengai is the fastest developed field in the world and we are proud of it,” Dr Simiyu said. He said GDC has developed a model where steam developed by the company is converted into electricity by independent power generators. In Olkaria, GDC has steam equivalent to 410MW from 59 wells. Part of this steam has been converted into 280MW of electricity. An additional 129 MW worth of steam is still available for power generation.

The injection of an additional 280MW has reduced the cost of electricity by at 30 per cent. According to computations, the Menengai model of reduced cost of drilling and the cost of geothermal energy will trade about Sh5 per KwH making it the cheapest source of power in Kenya.

Simiyu said world over, geothermal projects take up to 30 years while in Kenya, it has taken about 10 years. He noted that operations have also begun within the North Rift region for a further input of 200MW for phase one, though the estimated potential is 3000MW.