Africa - Kenya wind energy plan gets government's support

Plans for a delayed 300 MW wind farm in Kenya can now proceed after lenders agreed to rely on the government's assurance that it backed the wind power plan, instead of proper guarantees, the chairman of the project said.

Kenya's government has been scratching its head over how to deal with demand from lenders for financial guarantees. Kenyan law do not allow the Treasury to put down a security for a private venture.

Once complete, the Lake Turkana Wind Power (LTWP) project will sell its output to the country's sole power distributor Kenya Power that is majority owned by the government. The two have already agreed on feed-in tariffs of 7,22 euro cents per kilowatt hour for 20 years.

"Guarantees, we are not being given. What we are getting is a letter of comfort, or support, from the ministry of finance. This has now been agreed with the lenders as an acceptable format so we can move forward," Carlo van Wageningen, chairman of LTWP, told Reuters in an interview.

Other independent power producers awaiting government guarantees will get similar letters, he said. "It is a format acceptable with the lenders. They are comfortable." Lenders are lined up to provide 430-million euros for the Turkana project, while equity will cough up another 185-million euros.

African Development Bank (AfDB) is the lead arranger and is working with two co-arrangers, South Africa's Nedbank and Standard Bank - London, he said.

Financial closure on the deal will take another six to eight months, van Wageningen told Reuters late on Wednesday, while the first 50 MW are expected to come onstream 19 months after groundbreaking, likely in September.

LTWP's largest engineering, procurement and construction contract will be for the 358 turbines -- to be procured from Danish Vestas Wind Systems -- it needs for the farm and a service agreement for 15 years.

Other contracts to be signed include upgrading a 157 km stretch of road connecting the project site in Kenya's remote northwestern corner to the nearest tarmac road.

Other construction contracts to be arranged are for substations, networking the individual turbines to one another, a village for about 150 staff members and a 428 km transmission line to conduct the electricity to the national grid. "We are very happy now that we can move. The ball is now back in our court," van Wageningen said.

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