Kenya: Press Release: USD870m Financing Agreement for Lake Turkana Wind Power Signed
Monday, 24 March 2014
Johannesburg, 24 March 2014 --- The Lake Turkana Wind Power Project (http://ltwp.co.ke) (LTWP), conceived to add an existing 300MW of reliable, low cost wind energy to the national grid of Kenya, reached a critical milestone following the signing of the financial agreements in Nairobi, Kenya. |
The signing of the over USD870m financing agreements represents a major breakthrough to completing the biggest clean power energy project in Africa, spanning years of negotiations and fundraising, says TshepoMahloele, CEO of Harith General Partners (http://www.harith.co.za).
The project will be financed with a mixture of equity, mezzanine debt and senior debt.
The Lake Turkana Wind Power project is the first of its kind in East Africa and will be the largest wind project on the continent to date, says Mahloele. The project will benefit Kenya and specifically the Turkana area where unemployment is high, with jobs, economic development and, most importantly, electricity which is a vital element in any economy.
LTWP has signed a 20-year power purchase agreement with the government of Kenya through its electricity entity, Kenya Power.
The parties at the signing ceremony were represented by lead developer and independent power producer, Aldwych, which is majority owned by the Pan African Infrastructure Development Fund (PAIDF). LTWP is primarily responsible for the financing, construction and operation of the wind farm and comprises a grouping of investors and lenders with extensive financial and technical capabilities and experience on the African continent. They include FMO, Vestas, Finnfund, IFU and a strong local sponsor KP&P on the equity side. The syndicate of banks is led by the African Development (AfDB) and comprises Standard Bank, Nedbank, EIB, DEG and Proparco.
The project will be located on one of the best sites for a wind farm in the world. Not only are the wind speeds exceptionally high, but the wind comes only from one direction, is not seasonal, and is low in turbulence. The project site is situated on the southeast border of Lake Turkana between two high ranging mountains in the Turkana Corridor where a low level jet stream originating in the Indian Ocean creates favourable wind conditions.
Mahloele says the LTWP will essentially assist diversify Kenya’s energy mix and reduce the country’s reliance on power production from oil and diesel power generators. The Kenyan government will save millions per year on importing fuel. The LTWP tax contribution to Kenya alone will be approximately USD27m annually and USD548m over the life of the investment.
Mahloele says the combination of international financial and technical expertise has ensured that the project is structured in a bankable and sustainable form in accordance with international standards.
This project also forms part of Harith’s commitment to the United States backed Power Plan announced last year by the US President Barack Obama to bring more than 10,000MW of electricity to sub Saharan Africa. Through Power Africa, Harith has committed USD70m for wind energy in Kenya and USD500m across the African power sector through a new fund.
Mahloele says the investment is the result of the forward thinking and planning on the part of the Kenyan leadership who had undertaken comprehensive power sector reforms over the past decade.
In Kenya, electricity is mainly generated from hydro, thermal and geothermal sources. Wind generation accounts for less than 6MW of the installed capacity. Currently, hydro power comprises over 52% of the installed capacity in Kenya and is sourced from various stations managed by the Kenya Electricity Generating Company (KenGen).
‘It is our assertion that the Lake Turkana Wind Project will greatly reduce Kenya’s over reliance on hydropower which is playing a critical role in ensuring security of electricity supply but is however vulnerable to periodic draught seasons,’ says Mahloele.