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African Development Bank (AfDB) loans Kenya Power Sh15b to boost connections

By Moses Michira | August 13th 2015

Kenya Power has received Sh15 billion from the African Development Bank (AfDB) to boost connection of more Kenyans to the national grid.

The funding is expected to enable the national power distributor to connect 314,000 households before June next year. It is the third instalment of borrowed funds worth Sh43.5 billion that the utility firm is spending in enhancing access to electricity and to ensure achievement of universal access to electricity by 2020.

The World Bank and Government of Kenya have already loaned the firm Sh28.5 billion to fund new electricity connections. Kenya Power Chief Executive Ben Chumo said the funds from the AfDB would be released any time now and would be essential in creating demand for new power generation coming on board.

“This is the biggest support that we have received to enhance access,” Dr Chumo said after signing a power purchase agreement for 70MW from a firm associated with another listed company, Centum. Seven out of every 10 households are projected to be connected to the electricity grid by the end of 2017, helped in part through credit facilities by AfDB to connect homes to electricity.

Kenya is seeking to enhance electricity access through lower connection costs, currently down more than 70 per cent to a subsidised cost of Sh15,000 per connection.

Kenya Power said it will utilise the funds to connect a million households per year until universal access is attained, and is expected to offer sufficient demand for the nearly 2800MW to be generated by various projects that are promoted by private sector investors.

Dispel fears

Chumo used the opportunity to dispel fears that investments in power generation were running ahead of consumption, adding, “In the very unlikely circumstances, we could export any surplus electricity to Rwanda and Tanzania.”

Akiira Geothermal Ltd, to be developed at an estimated cost of Sh35 billion, is promoted by four companies, with Centum as the largest investor. The project, when complete, is expected to significantly increase the share of geothermal energy in the country’s electricity mix.

Already, geothermal energy accounts for almost half of all electricity consumed in the country. Until five years ago, 70 per cent came from hydro-generation. Drilling works on Akiira’s geothermal wells began last week in an exploration exercise that precedes the actual development of the generation plant.

Akiira Chief Executive Robert Bunyi said the project was expected to be complete by the end of 2017. “We are currently at the exploration stage, and today’s PPA gives confidence to go full steam forward with the project,” Bunyi, an investment banker added. His firm would sell its energy at $9.32 cents a unit. Kenya Power also entered another purchase agreement with Kleen Energy for 6MW that would be generated from Rupingazi River in Embu County.

Kleen Energy Managing Director Edward Mugo expects the small hydro-generation plant to serve about 40 per cent of the energy needs of Embu town and its environs. Mugo, who did not disclose the cost of his project, said the deal would allow him sell electricity at $9.20 cents a unit to Kenya Power.

Heavy fuels

Both projects are among dozens that are at various stages of development, and are expected to reduce reliance on electricity generated from heavy fuels. Diesel generators are expensive sources of electricity but could soon be wiped out by the cheaper energy sources, currently making up 14.8 per cent of all generation.

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