CDC, the UK development finance institution, is making a foray into Kenya’s geothermal electricity sub-sector.
It has acquired one of the firms that have been contracted to put up power plants at the Menengai geothermal fields.
Through its Africa focused energy firm Globeleq, CDC has acquired a controlling stake in Quantum Power East Africa GT Menengai (QPEA).
QPEA is among three firms that were awarded contracts by Geothermal Development Company (GDC) to develop power plants in Menengai.
QPEA is supposed to build a 35-megawatt power plant in the region and use geothermal from wells drilled by GDC to generate electricity.
The entry of Globeleq in the area could see resumption of works in the fields, with the three firms having failed to achieve much years after winning bids to build the power plants.
The firm is 70 per cent owned by CDC and 30 per cent owned by Norfund, the Norwegian State-owned investment company.
In a gazette notice published on Friday, the Competition Authority of Kenya (CAK) said it had approved the proposed acquisition of the QPEA GT Menengai Ltd by Globeleq Geothermal (Kenya) Ltd.
“It is notified, for general information, that in the exercise of the powers conferred upon the Competition Authority by… the Competition Act, the Competition Authority has authorised the proposed transaction as set out herein,” said CAK in the notice.
GDC had developed the fields, works which entailed drilling wells as well as the construction of steam gathering systems in what the company said was de-risking them in anticipation that this would be attractive to private sector companies.
While Kenya has huge potential of producing electricity from geothermal, it has been said to be a costly undertaking, especially exploration, which has deterred private sector firms from investing in the sector.
But lowering the risks by having GDC doing the heavy investment was expected to enable private firms come in and build power plants with ease and the geothermal steam to generate power.
They would in turn pay GDC for the supply of the steam.
The companies have, however, been slow to get the projects off the ground, all citing failure to access financing to build the plants.
The three firms are supposed to build a plant each, with capacity to generate 35MW, bringing the total to 105MW.
They were at the onset expected to invest a combined Sh30 billion in the power plants that were scheduled to start operations in December 2016.
QPEA recently said it expected to build its plant at a cost of Sh10.76 billion ($97.8 million).
Quantum Power has 25-year Power Purchase Agreement with Kenya Power, whereby the electricity retailer will pay Sh5.50 (five US cents) per kilowatt hour (kWh) of electricity to the company and another Sh2.20 (two US cents) per kWh to GDC for the steam.
The acquisition of QPEA strengthens Globeleq’s position in Kenya electricity sector. It has a minority interest in the Tsavo (Kipevu II) 75 MW thermal power plant.
It is also in the process of building 52MW solar power plant in Malindi.