KenGen bets on geothermal power to cut cost of electricity

By Jackson Okoth

It will soon cost less to use electricity with the ongoing expansion expected to pump an additional 585MW into the national grid.

The entire expansion plan will cost an about $4.5 billion in a deal that involves a selection of international financiers and contractors.

An estimated 280MW of geothermal power will be available by 2014 in a scaled-up programme that will see the country reduce its reliance on the more expensive thermal and hydro-electric power.

Unlike hydroelectric power, geothermal power is cheaper and costs just about US 6.7 cents.

Unmatched demand

"While focus has been on stabilising power supply situation, attention is now shifting to creating more geothermal power to catch up with demand that has always been ahead of supply," said KenGen Chief Executive Officer Eddy Njoroge.

Njoroge made these remarks while releasing KenGen’s half-year results, for the period ending December 2011. The power utility firm’s pre-tax profits increased by 33 per cent, from Sh1.2 billion to Sh1.7 billion, during the period under consideration.

The firm’s earnings per share edged up 33 per cent to Sh0.54. Electricity revenue was up 12.9 per cent to Sh7.2billion attributable to commissioning of two new power plants, Tana and Kipevu III.

Operating expenses edged up 11.0 per cent to Sh5.6 billion mainly driven by depreciation of the new assets related to the two power plants.

Operating margins expanded 629bps to 31.5per cent. Finance costs went up 58.5 per cent to Sh300 million. The Board does not recommend payment of an interim dividend.

Expansion of the country’s 585MW geothermal power expansion will require drilling of at least 168 geothermal wells within OlKaria fields where huge steam deposits have been confirmed.

KenGen has already acquired seven drilling rigs to enable it meet the ambitious targets. The drilling budget is projected to cost an estimated $ 745 million — cash that will be sourced mainly from concessionary loans.

Contractors have already moved on site ready to commence the 280MW geothermal expansion plan running up to 2014 and will add an extra 25 per cent of electricity to the national grid.

Already, wells to feed the 280MW plant have been drilled and more than sufficient steam realised.

KenGen plans to acquire more wellhead generators to allow earlier electricity output from these wells even as construction work on the power plants continues.

A pilot wellhead generator has already been installed at Olkaria and is currently generating a total of 5MW.

When the geothermal expansion is complete by 2018, Kenya’s power supply will comprise 49 per cent geothermal, 28 per cent hydro and 18 per cent thermal.

To complement geothermal expansion, KenGen has been doing feasibility studies on a 100MW plant in Isiolo and 20MW wind generator in Ngong.

This is in addition to an 80MW thermal plant in Muhoroni. All these projects are expected to add an additional 200MW to the grid by 2014.