Kenya: KenGen Seeks Investors To Fund $686m LNG-powered Electricity Project

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VENTURES AFRICA – Kenyan Electricity Generating Company, KenGen has revealed plans for a $686 million gas-fired power plant to run on imported liquefied natural gas (LNG). KenGen Managing Director Eddy Njoroge said on Friday that the company intends to lobby private investors to fund the project.

KenGen plans to raise the money for the project due by 2015 by appealing to private investors. It also anticipates government incentive in form of capital.

“We are now exploring ways to finance the project,” Njoroge told Reuters.

 

“We have not raised any funds yet, but we are working closely with the PPP unit (private public partnership) on how we can structure the project to be implemented as a PPP project”, he added.

 

Because the government lacks funds, PPP have become a popular method for financing infrastructure projects in recent years. Under similar agreements, private entities and government form a joint venture when embarking on capital projects. However, PPPs usually end up with the government as the owner of the asset.

 

According to the company, the plant would help meet growing demand for electricity and help prevent frequent blackouts in east Africa’s biggest economy caused by generation shortfalls and an ageing grid. KenGen presently relies largely on hydro-power.

 

The plant, which will be based at the port city of Mombasa, will be fuelled by LNG processed at a facility located nearby and will reduce over-reliance on the more costly heavy fuel oil KenGen has resorted to during dry spells.

 

Last October, Kenya announced plans to float a tender for a LNG terminal at Mombasa, with construction expected to take up to 5 years.

 

KenGen generates a total of 1,414 MW from a mix of thermal, renewable energy and existing hydropower dams, while Kenya’s electricity consumption stands at 1,200 MW and is rising fast as the country strives towards industrialisation.

 

Njoroge said he expects the plant to provide 485 megawatts to the country and to have an economic life of 20 years. Once in production, the plant may be aided by recent discoveries of large natural gas reserves off the coast of Tanzania and Mozambique.

 

According to Njoroge, gas will be central to fulfilling the region’s power needs in the coming years.