Kenya's power generator seeks US$5.5 bn to expand output

Kenya Electricity Generating Co., the East African nation’s biggest power producer, said it will seek to raise $5.5 billion through a mix of 70 percent debt and 30 percent equity to finance a doubling of its output capacity, reports Bloomberg.

Development finance institutions, export agencies, commercial banks and other lenders will provide about $3.85 billion, while $1.65 billion will come from joint ventures, a rights offer and revenue, acting Chief Executive Officer Simon Ngure told reporters today in the capital, Nairobi.

KenGen, as the company is known, plans to generate 2,500 megawatts of additional capacity over 40 months, representing half of the government’s target to boost installed capacity by 5,000 megawatts by 2017, he said.

“We need this power  to drive economic growth in this country,” Ngure said.

With the economy growing and the population expanding, electricity consumption in Kenya is rising an average of 8 percent a year. KenGen produces 1,239 megawatts, while four private producers account for the remainder of the countrywide installed capacity of 1,664 megawatts, according to the company.

The state owns about 70 percent of KenGen, which currently relies on hydropower generation that is affected by recurrent drought. President Uhuru Kenyatta said in September the country plans to become more reliant on natural-gas and coal-fired generation to lower costs by as much as six-fold.

East Africa’s biggest economy is preparing to sell its inaugural Eurobond to raise as much as $2 billion by early next year to fund infrastructure development such as power projects.
KenGen is also considering a bond offer and in addition may sell an asset-backed bond linked to geothermal resources, Ngure said. Kenya is Africa’s largest geothermal-power producer.

“We are thinking about a year from now but we need to work on the numbers,” he said. “The size will be driven by the market and the value of the steam.”

The company yesterday announced profit surged to 5.25 billion shillings ($61.7 million) in the 12 months through June from 2.82 billion shillings a year earlier.

Safaricom SACCO calling Kenyans in the Diaspora

THE Safaricom Investment Cooperative is developing a Kshs 1.0 billion shilling housing project in Mlolongo dubbed Blue Bells Gardens. Blue Bells Garden is the Cooperative’s first housing project and the only one of its kind in Mlolongo.

The 300 unit project is being put up in partnership with the Co-operative Bank and is expected to be fully completed in 2015.

The phase one of the two-phase project will build 160 units while in the phase two, 140 units will be build. A three-bedroom flat will retail at Kshs 6.6 million while a 2-bedroom unit will cost Kshs5.6 million.

 Blue Bells Gardens is a top of the range residential facility nestled along the busy Nairobi-Mombasa Road Highway and ICT center. It will have a world class health care facility and a commercial center with large open spaces for children’s play grounds.

Ms. Mackrine Abukah, the Chairperson of Safaricom Investment SACCO announced that it is inviting non-safaricom staff to join the SACCO. To join one needs to pay a subscription fee of Ksh 6 000 and a monthly subscription of kshs 325.

She also announced that the SACCO is open for Kenyan in the diaspora whom they are inviting to invest in the Mlolongo housing project either as buyers or investors in the SACCO. The modalities for Diaspora membership are being worked out, she said. Apart from the Mlolongo development, the SACCO also owns plots in Kajiado, Nanyuki, Kisumu and Machakos on which she develop houses for sale.

At  the end of last year, the SACCO had a capital base of Kshs.503.78million up from Kshs.273.13million in 2011.

The development is targeting middle to upper income earners working in Nairobi and Machakos counties. She is targeting Kenyans in the diaspora to help them invest in housing and help curb the runway housing shortage in Kenya. Kenyans in the diaspora have been duped by dishonest people in the past.

AfDB Launches US$1.26B Kenya – Ethiopia Electricity Highway

The African Development Bank today launched the 1,068-kilometre high-voltage electricity highway to be built between Kenya and Ethiopia.

The project, which is expected to be completed in less than five years, involves the construction of transmission lines of about 437 km in Ethiopia and about 631 km in Kenya and associated AC/DC converter stations at Wolayta-Sodo (Ethiopia) and Suswa (Kenya) substations with a transfer capacity of up to 2,000 MW in either direction.

Speaking at the launch, organized to brief on the project’s technical resources, African Development Bank’s Regional Director for East Africa Resource Centre (EARC), Gabriel Negatu, reiterated the importance of the project to the East Africa’s cross-border trading.

“The African Development Bank recognizes of each of the country specific economic blueprints as well as the region’s economic priorities. This project establishes power trade between Ethiopia and Kenya and the wider East Africa region. It not only improves electricity access at affordable prices and enhances cross-border trade, but also provides an important opportunity to generate revenues for countries having excess power generation capacity, as is the case for Ethiopia,” said Negatu.

He added: “The direct beneficiaries of the project are households, businesses, and industries in communities located in Kenya, the direct off-taker of the power. The interconnection with Ethiopia will ensure access to reliable and affordable energy to around 870,000 households by 2018.”

AfDB played a leading role in the preparation of the project by financing some of the feasibility studies required to making the project bankable.

The African Development Bank, the World Bank, the Governments of Ethiopia and Kenya will finance the project. In addition the French Development Agency expressed interest to finance the project.

The financing for the project breaks down as follows: African Development Bank, US $338 million; World Bank US $684 million; Government of Ethiopia, US $32 million; Government of Kenya, US $88 million; and the expected financing from the French Development Agency, US $118 million.

The African Development Bank’s financing will be used for the financing of the total cost of the transmission line subcomponent and part of the cost of the converter station subcomponent in Ethiopia; part of the cost of the transmission line subcomponent in Kenya; the total cost of the consultancy services for supervision and management for both Ethiopia and Kenya, as well as part of the cost of capacity building component in Ethiopia and in Kenya.

The World Bank’s financing will be used for the financing of the total cost of the subcomponent converter stations in Kenya and total cost of transmission system reinforcement in Kenya and the major part converter stations in Ethiopia as well as part of the cost of the capacity building component in Ethiopia and in Kenya.

Financing from French Development Agency is expected to cover part of the transmission line subcomponent for Kenya. This story was lifted from the Afdb website unediuted.Pleaase read

 http://www.afdb.org/en/news-and-events/article/afdb-launches-us-1-26b-kenya-ethiopia-electricity-highway-11733/?ut

IFC's foray into African capital markets

THE INTERNATIONAL Finance Corporation, the private sector arm of the World Bank, has launched its foray into Africa’s capital markets. It will begin by issuing a US$50 million equivalent bond in the Nigeria Securities Exchange. Next in line will be Kenya which said to have issued the necessary approvals.

Kenya and Nigeria are among the 10 securities exchange targeted for IFC’s Pan-African Domestic Medium-Term Note Programme. Other countries targeted include Botswana, Ghana, Kenya, Namibia, Rwanda, South Africa, Uganda, and Zambia.

 The programme will see IFC issue local currency bonds in the targeted countries to support the local private sector and also the capital market, says a statement from IFC. While the domestic capital markets are excited about IFC’s foray, they are concerned at the small amounts it is issuing. “US$50 million in the Nigeria market is not even a drop in the ocean,” say analysts.

 It is not clear what the size of the Kenyan issue will be. However, it could be in the same region as the Nigerian issue US$50million. IFC’s entry into any market raises its profile among investors and fund managers leading to more foreign activity in the local markets. IFC, said a Kenyan Banker in whose bank IFC is an investor,” is a confidence builder. If it invests in your stock, other investor follow suit.” 

Consequently, the markets are excited and are seeing even increased activity in anticipation of IFC’s entry.

Stock market players in Kenya agree saying IFC’s entry into the market is a vote of confidence in the market.  Stock brokers in Nairobi say IFC’s entry will raise NSE’s profile among skeptics in West. Africa whose bond market is generally small is likely to witness a huge influx as countries issue infrastructure bonds to finance their huge infrastructure programmes.  

Kenya has already floated More Kshs 100 billion (US$1.2 billion) infrastructure bonds

Ground breaking for Mombasa port this week.

The Ground Breaking ceremony for the expansion of Mombasa  Port on Thursday November 22nd 2012, we can report.

The ceremony to be officiated 2012,by President Mwai Kibaki  will launch the second of the Port’s two-phase  upgrading project that began last year. The US$ 320 million  project will turn the Mombasa port into a Mega port.

The first phase of the development project included the dredging of the port to a depth of 15 Metres. It also widened the Likoni Channel from 250 Meters to more than 300 meters, while the turning basin was widened to 600 meters. It cost a US$62 million.

The second phase  involves construction of three berths with a straight-line quay of 900 meters, reclamation of 100 hectares of land, second container terminal with a capacity of one million TEUs, construction of a 5KM link road to Mombasa southern by-pass and a Railway line.  At the end of the two-year- US$200 million project, the Mombasa Port will have a capacity of 1.25 Million TEUs. 

The Mombasa port, which is the hub of shipping business in east and central Africa, has come under intense pressure to expand in the recent past due to robust economic growth in the region and also changes in vessel sizes. 

Robust economic growth both in Kenya and among her landlocked neighbours such as Uganda, Rwanda, Burundi and South Sudan generated increased demand for imports and exports through the port.
This growth in large vessels put pressure on major ports in Africa to invest in capacity expansion. The Mombasa Port was no exception. The expansion project that will be completed by the end of 2014 will ensure that Mombasa retains its positions as a major port in Africa. 
For detail please go to http://eaers.blogspot.com/2012/11/expansion-of-Mombasa-port-begins-in.html

Konza City's ground breaking this month

The ground breaking ceremony for KonzaTecho city will take place before the end of this month, we can report.
We have reliably learnt that the ceremony, which was slated for last Month was post phoned due to security Concerns and the President's busy Diary.
"The President is keen on the project," said the source. The line Ministry, the Ministry of information is ready for the ceremony and is only waiting for signal from the president's Office.The President was due to lead the ground breaking ceremony.
 Top Ministry of information officials met earlier this week to review its preparedness and all is set, said the source. They are now awaiting the date from OP to roll out. The US$7 billion Techno city is billed the silicon Savannah. Some investors are already rearing to go and were beginning to worry about the delay.
For more details on the story Go to http://eaers.blogspot.com/2012/09/konza-techno-city-begins-in-october.html

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.