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Danish firm gets nod to buy thermal plant

BUSINESS
By Macharia Kamau | July 13th 2021

Danish giant AP Moller has received the go-ahead to acquire a Thika-based thermal electricity generating plant from the Common Market for Eastern and Southern Africa (Comesa) Competition Commission.

The acquisition of Thika Power Plant will increase AP Moller Capital’s interest in Kenya’s power generating sector, with the company having recently acquired Iberafrica, another thermal plant.

The Thika Power Plant with a power purchase agreement (PPA) running to 2034, has a generating capacity of 87 megawatts (MW).

AP Moller is in the process of acquiring the plant through its Africa Investment Fund (AIF) Holdings, which owns Iberafrica with a 52.5MW plant in Nairobi, the Comesa Competition Commission’s Committee Responsible for Initial Decisions (CID) said.

“The CID determined that the merger is not likely to substantially prevent or lessen competition in the Common Market or a substantial part of it, nor be contrary to the public interest,” said the committee in its determination.

“The CID further determined that the transaction is unlikely to negatively affect trade between member states. The CID, therefore, approved this transaction.”

The firm now awaits approval from Kenya regulators before taking over the power producer. AP Moller is getting into the country’s electricity production sector, acquiring thermal power plants at a time when they are under heavy scrutiny.

The plants, which use heavy fuel oil to produce power have in the past been blamed for the high cost of power, with the consumers having to bear the cost of fuel used.

There is also an increase in the push to have power producers make their dealings with Kenya Power more transparent, including proposed laws that require them to open up new and existing contracts with the company for public scrutiny.

Thika Power was paid Sh2.75 billion by Kenya Power in the year to June 2020 for supply of electricity to the grid and compensation for the fuel acquired to produce power.

This was split into Sh2.1 billion for electricity supplied to the power retailer and Sh654 million fuel costs - which compensate thermal power producers on money spent on acquiring fuel for power generation. AP Moller, through AIF, acquired IberAfrica at a cost of Sh6 billion in 2020. IberAfrica had the largest thermal power capacity in the country, operating two power plants with a combined capacity of 103.57MW.

One of the plant's PPAs however lapsed and was not renewed, leaving it to operate the plant with an installed capacity of 52.4MW whose PPA with Kenya Power will expire in 2034.

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