| Abstract |
Development of geothermal power is highly capital intensive and extremely risky especially at the beginning before resources are proven. It takes large upfront investment to drill a prospect, and once proven, long lead times are required before generation commences. Early geothermal development in Kenya was achieved with the most financing from the World Bank and internal sources. Typically, like the case for Olkaria 1 and 2, KenGen would employ its own internal finance for training and developing capacity for the requisite professionals, carry out surface exploration activities and then secure external financing at the time for exploration drilling going forward. However, in the early nineties, most development partners pulled-out due to the prevailing political situation in the country. This led to pressure on local finance sources already strained by other economic pressure. Development of vast geothermal resources in the country then stagnated for over a decade. Except for surface exploration activities funded by government, no major activities were achieved towards development of the resources already proven at Olkaria. The reforms in both the political and energy environment in the country, led to the return of development financial institutions’ involvement in Kenya’s power sector. Other international commercial and project finance banks like Exim Bank later made significant contributions into the geothermal space. KenGen has leveraged on these and the widening local capital market to finance its accelerated geothermal programme. Besides, we have explored joint venturing as another option for financing future projects. Here, we present an analogy of our experience in securing finances for projects ranging from small wellhead units of 2-5 MWe to geothermal plants of conventional size. Different project finance options are compared and possible impacts to project cost, schedule and execution complexity are discussed. |