Construction of Sh100b dam in Nyanza put off by Treasury

The Government will not be building the Sh100 billion Magwaga dam in Nyamira County as earlier planned, an agency has revealed.

The Lake Basin Development Authority (LBDA), through its chairman Calvince Owidi, said Treasury no longer finds the project financially viable.

Mr Owidi said in an interview yesterday that the dam was to be financed by the World Bank. The funds were to be channeled to the project through Treasury.

But Treasury, going by the advice of an unnamed Transaction Adviser (TA), said Kenya was eager to produce energy though other sources such as nuclear and geothermal.

“The country does not need more dams to produce hydro-power. We were keen on it because of its viability, although Treasury is reluctant about it,” said Mr Owidi.

According to the LBDA chairman, besides being a source of hydro-power, the dam would have also mitigated flooding in the Nyando plains.

Owidi explained that the Government had initially expressed a strong interest in funding the project, but this changed after the TA contracted to study its feasibility gave a negative report.

In its latest correspondence with LBDA, Treasury has struck out the dam from its list of flagship projects under the Vision 2030 blueprint.

Before it did that, LBDA had insisted that the project was viable. It had asked Treasury to carry out another study by engaging the same transaction adviser.

But Treasury declined, saying the World Bank had withdrawn funding for TA services.

State funding

LBDA was then advised to write to the International Finance Corporation (IFC), the investment arm of the World Bank, requesting them to engage the TA in a repeat of the study.

IFC accepted the request through a letter dated December 18, 2015.

In a meeting held at Treasury Building on January, 29, 2016, IFC presented their preliminary report.

The report made previous assertions that though Magwaga Dam had a lot of economic benefits, it was not financially viable.

The IFC report now seems to have put to rest any plans to construct the dam.

According to LBDA, for the dam to be built, State funding is an imperative.

This is because in order to achieve the globally accepted Debt Service Coverage Ratio of 1.5, the project would require a Government subsidy of 87 per cent.

Owidi now says the only lifeline for the dam construction is if the Government hears LBDA’s pleas to completely ignore the TA’s reports.

Owidi argues that two decades ago, Alexander Gibbs Consulting Company, a British firm, made an independent research on the viability of a dam in Nyando, which they found to be worthwhile.

According to Owidi, such a dam would inject 120 megawatts to the national grid, and bring 34,000 acres of land under irrigation. Owidi said the Government should follow such a research and not adopt the TA’s findings.

Nyamira Governor John Nyagarama has sought an explanation on the whole issue. “We want to know what befell this dam,” said Mr Nyagarama.