Power rationing cuts in sight, but costs soar

By James Anyanzwa

The current power-rationing programme could ease off this month.

The Kenya Electricity Generating Company (KenGen) has contracted an additional 140MW power plant with a view of easing power crisis that has hit the economy hard. On the flipside however, consumers will pay more in power bills as the extra generators gobble up fuel whose prices are on the increase.

Mr Eddy Njoroge, the company’s managing director said the extra capacity, which would be installed by the end of this month, coupled with the expected long rains could end the ongoing power rationing.

Power generation had dropped by 23 per cent owing to the closure of Masinga Power Station after its water levels declined to 5 cubic metres per second, the lowest in 75 years.

"We have contracted a new power plant with 140MW to be installed by the end of September," Njoroge told a media and investor briefing during an event to unveil the features of the company’s proposed Sh15 billion public infrastructure bond offer in Nairobi on Monday.

The proceeds of the bond issue would be invested in additional power generation as part of the company’s five-year plan (2008-2012).

KenGen hopes to expand its power generation capacity by 528MW in 2012 and 1,635MW between (2013-2019). The bond proceeds are also expected to fund a thermal plant in Mombasa to generate 120 megawatts, upgrading Tana, Masinga and a third unit of Kindaruma dams.

Geothermal power

The upgrading of closed Masinga Dam is expected to increase its capacity by 25 per cent to generate about 90 gigawatt hours of power.

KenGen wants to increase its geothermal power production capacity through an upgrade of the Olkaria Power Project.

"Our strategy is geothermal. It is the cheapest for this country and that is the direction we are heading," said Njoroge. KenGen’s 10-year bond will be priced at a fixed net interest rate of 12.5 per cent per year, payable every six months.

Investors in the bond would require a minimum of sh100,000 with additional investments above the minimum in multiples of Sh100,000. Retail investors will take up 20 per cent of the bond while local and foreign institutional investors will subscribe to the remaining 80 per cent.

Njoroge said in the event of an oversubscription, KenGen can take up to an additional Sh10 billion through what is dubbed as "greenshoe option."

"It has been approved by the Capital Markets Authority that we can go as far as Sh25 billion," he said.