Sunday, 21 October 2012

Oh no! Not the World Bank again!

A windfarm: LWTP proposes to build a similar project
The World Bank has pulled out of Africa's largest wind power project, we have reliably learned. The bank, according to reliable sources, says the project is not viable and has therefore refused to offer guarantees sought by financiers.

This is the third project in Kenya the World Bank has sabotaged in the last six years citing feeble excuses. In 2010 its private sector lending arm- IFC pulled of Southern by pass in Nairobi at the last minute citing the "credibility of some of the contractors."  In 2006 IFC also pulled out of the concessioning of Kenya and Uganda Railways at the last-minute, also citing "unfulfilled conditions" by Sheltham Railways. The concession is still fighting for its life, six years on.

The World Bank is also said to be raising  irrelevant issues on the Kenya- Ethiopia Power connection deal-that could derail it.
 In the case of Lake Turkana wind power project, The World Bank is says that the wind farm is too big for the national power grid and huge amounts of electricity could go to waste. This, argue the mandarins at the Bank, would deny LTWP revenues and hurting its ability to repay the loans. 

Bujagali Hydropower: Was a victim of World Bank's
feeble Analysis
This is an argument that analysts find baffling. If the problem is the capacity of the national grid to distribute all the power produced in the country, the solution is to upgrade it not to try to kill a project, analysts argue. 

It is noteworthy that the bank was using the similar arguments against Bujagali Hydro power in Uganda, and is using similar arguments to stall Karuma power plant, also in Uganda. In the case of Bujagali, the the bank and its cohorts were proved wrong. The plant produces 250MW which has doubled electricity supply in Uganda, but sources indicate demand will exceed supply in the next two years.

The Bank wants to the capacity of Karuma dam reduced from 600-750MW to 400 -450 MW arguing that 700MW is excess capacity that cannot be sustained. Sound familiar?

In both cases, Uganda has demonstrated boldness and leadership  in pursuing projects that are critical to national well being. Bujagali was built despite objections. Karuma dam also appears headed in the same direction.

 In Kenya, the southern by-pass in Nairobi, which was meant to be toll-road when IFC pulled out, has now been funded by China and construction is on-going. It is a public road but going by Kenya's paradigm shift, we shall not be surprised if it becomes a toll-road on completion.

In the case of LWTP, the government  turned to the World Bank to offer sovereign guarantees after the financiers ' reluctance to fund the project on the strength of its PPA with Kenya Power and Lighting company, the power distributor in Kenya.  The Kenya government was reluctant to offer the sovereign guarantee  for a private sector funded project. 

However, it seems, it will have to offer such guarantee.  It has already been endorsed ans a flagship project by the   Vision 2030 delivery secretariat. Vision 2030 is the long term  development blue print for Kenya.

 All is not lost however for the lead financial arranger; AfDB has re-affirmed its commitment to finance the project. "The African Bank is now looking at ways of getting other guarantors to ensure the project does not delay further," local media reported.

The €582 million Lake Turkana wind project in Northern Kenya will produce some 300MW of wind generated electricity, also another first in Africa. That will be close to 40 per cent of the electricity currently generated in Kenya. LWTP has a 21 year PPA with KPLC to sale electricity to it at less than 10 US cents per unit, the cheapest in the country.

Lake Turkana wind farm will be located on a 40,000-acre farm in Loyangalani in Marsabit County. It will comprise of 365 turbines each with a capacity of - 850Kwh; the associated overhead electric grid collection system and a high voltage substation.

Already a contract for the construction of 300KM of road in the project area has been awarded.

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