World Bank guarantees 4 Kenyan power projects for 285 MW

NAIROBI (Reuters) - The World Bank will partly guarantee generation projects by four Kenyan independent power generators that will jointly produce an additional 285 megawatts of electricity by 2014, it said on Tuesday.

Like other African states where blackouts are common due to generation shortfalls and ageing grids, east Africa's biggest economy is required to invest huge sums of money yearly, to meet growing demand for power, amid robust economic activity.

Johannes Zutt, the bank's country director for Kenya, said Thika Power, which will produce 87 MW by the end of the year, would be the first to benefit from the partial risk guarantees totalling $166 million.

"This... financing for the energy sector will enable Kenya to mobilise additional financing of $623 million, including $400 million in private investments and commercial lending," he said.

Partial risk guarantees offer comfort to investors who are assured of repayment in case of unforeseen risks like political upheavals, and usually act as an alternative to government guarantees, thus keeping public debt under control.

Other power producers to benefit from the bank's guarantees are Triumph Generating Company, Gulf Power and Ormat Technologies' OrPower 4, Zutt told a press briefing.

All four firms have power purchase agreements with Kenya Power, the state-controlled sole distributor of electricity.

The country has an installed capacity of 1,250 megawatts but power generating firms and the government are racing to keep up with the growing demand.

There is no shortage of independent firms willing to start generation projects, but they were hampered by lack of finance, Patrick Nyoike, the top official at the country's ministry of energy, told Reuters.

"(Lack of partial risk guarantees) is one of the major challenges. These power plants ought to have been up and running by June last year," said Nyoike, referring to the projects by Thika, Gulf and Triumph.

He said that once the generation from the project by Thika Power kicks in, it would help retire contracts signed by the government for provision of about 90 MW from expensive diesel plants ran by private firms.

Source: http://news.yahoo.com/world-bank-guarantees-4-kenyan-power-projects-285-151717694--business.html

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