KenGen plans $686m gas-fired power plant

19 May 2012, Sweetcrude, NAIROBI – KENYAN electricity generating company KenGen plans to raise funds from private investors for a $686 million gas-fired power plant to run on imported liquefied natural gas (LNG).

KenGen, which relies largely on hydro power, said 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.

The company plans to raise the money for the project due by 2015 by appealing to private investors, and also expects the government to contribute capital, according to Eddy Njoroge, KenGen managing director.

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

“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.”

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 both contribute capital for projects.

However, unlike other arrangements, PPPs usually end up with the government as the owner of the asset.

To be based at the port city of Mombasa, the plant 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.

Kenya last October said it planned to float a tender for a LNG terminal at Mombasa. Construction is 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 to become industrialised.

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 several large natural gas finds off the coast of Tanzania and Mozambique.

Western companies announced finds of huge additional quantities of gas off the coast of Mozambique and Tanzania this week, cementing the future of east and southern Africa as a new supplier exporting LNG to energy-hungry Asia.

KenGen said the LNG could also come from the Middle East and other parts of the world.

Njoroge said gas will play a major role in fulfilling the region’s power needs in the coming years.

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