Kenya seeks investors for 3,000 MW geothermal steam field

Kenya's state-run Geothermal Development Company (GDC) plans to seek $750 million from the Group of Eight major nations to drill a 3,000 megawatt steam field in 2013, a senior company official said on Thursday.

East Africa's largest economy is the first country in Africa to tap the vast hot steam in the earth's crust, in a bid to diversify its power generation and reduce over-reliance on weather-dependent hydropower as well as thermal generation.

Silas Simiyu, GDC's chief executive officer, told Reuters the firm was negotiating for funds for development of the 3,000 MW steam field, dubbed Silali, located in Kenya's Rift Valley.

"Under the G8, they are planning to support us for Silali. We are doing it as a block from Lake Bogoria to Silali for a total of 3,000 MW," said Simiyu on the sidelines of the launch of the company's first major steam field project, Menengai.

"For the steam, the cost is about $750 million ... We want to move there next year, once we finalise the financing agreement."

Simiyu said GDC had 16 geothermal sites in the Rift Valley, which has the potential to produce 7,000 MW, of which the first phase of Menengai has begun.

The African Development Bank has given GDC a $124.5 million loan and a further $25 million through the Climate Investment Fund for the development of the first phase of 400 MW in Menengai, Gabriel Negatu, director of the east Africa regional resource centre at the bank, said.

Development of the 400 MW steam field is set to be completed by 2016, with Independent Power Producers (IPPs) expected to bid for power plant installation, Simiyu said.

He added that 19 international and local firms had been short-listed, including the country's main power producer, Kenya Electricity Generating Company (KenGen) and Kenyan investment company, TransCentury

"Out of these 19, four will be given concessions for 100 MW each. There is a basis for these firms to be selected. One is their tariffs have to be low and their utilisation of our steam has to be efficient," said Simiyu.

Successful firms will be expected to reduce the cost of electricity by as much as half of the 12 shillings per kilowatt hour at present, Simiyu said.

Kenya plans to tap at least 5,000 MW of geothermal power to wean the country off unreliable hydropower. Blackouts happen frequently due to generation shortfalls and an ageing grid.

KenGen is also seeking investors to put up six geothermal plants to produce a total of 585 MW.

-Reuters