| Abstract |
Geothermal Development Company (GDC) was formed by the Government of Kenya to accelerate geothermal development in Kenya. To achieve this, GDC undertakes exploration, appraisal and production drilling in geothermal fields and prospects in Kenya in order to mitigate upfront risks associated with geothermal development that deter private sector participation in the sector. GDC is also mandated to lower the cost of electric power by providing fuel (steam) to power generators- KenGen and Independent Power Producers (IPPs). This will ensure that electricity is readily available to help meet the country`s increasing demand for power by producing indigenous, clean, and inexpensive geothermal power. GDC is currently developing the geothermal resources of various fields including its flagship project; the Menengai geothermal field. The first 105 MW project for Menengai geothermal field is being implemented by GDC under a public private partnership (PPP) arrangement. Under this arrangement, GDC is the steam supplier, Kenya Power (KPLC) is the off-taker, and Kenya Transmission Company (KETRACO) is in charge of the evacuation facilities while three IPPs are to build three power plants generating 35 MW each. The project is in advanced stages of power plant implementation with most of the other components complete. In order to successfully develop the power plant under a PPP basis using project finance, the IPP lenders who carry more risk require a level of comfort before committing to the project. The model adopted by GDC for the Menengai 105 MW project faced challenges related to Project Transaction Documents, Feasibility Study, GDC Financial Creditworthiness, Short Term Payment Guarantees, Termination Risk, Long Term Field Testing and Land Access Rights. Various innovative mitigation measures are being explored in order to successfully complete the project. This will enable Kenya raise required private capital on a public-private partnership basis to meet Kenya’s projected energy base load demand growth. This will help in achieving the countries energy targets as indicated in vision 2030. |