$870m for Africa’s biggest wind power energy project

The Sierra Leone Telegraph: 24 March 2014

wind turbine in TanzaniaAfrica’s economic progress very much depends on its ability to transform its natural resources into globally marketable commodities. But without electricity, the continent’s dream of a better standard of living for its people will continue to be unrealised.

The good news however, is that several African countries are actively pursuing development pathways and options that could provide low cost and environmentally friendly energy that will power their economic transformation.

In Sierra Leone, plans are underway for the development of a much needed solar energy park costing $18 million. Small drop in an ocean, but considering the country’s low level economic productivity caused by electricity problems, every little helps.

Other African nations have greater ambitions when it comes to green energy production. In Kenya for example, they have identified nine sites where solar power plants could provide more than half the country’s electricity by 2016, costing $1.2bn.

But the east African nation has other big plans too. When completed, its Lake Turkana Wind Power Project will add 300MW of reliable, low cost wind energy to the national grid of Kenya.

“Today’s signing of a $870m financing agreement by the Kenyans, represents a major breakthrough to actualizing the biggest clean power energy project in Africa, spanning years of negotiations and fundraising,” says Tshepo Mahloele, CEO of Harith General Partners

This finance package is a mixture of equity, mezzanine debt and senior debt.

kenya wind power 2 - tshepo mahloeles“The Lake Turkana Wind Power project is the first of its kind in East Africa and will be the largest wind project on the continent to date,” Mahloele told the media.

The Project will benefit Kenya, and specifically the Turkana area where unemployment is high, and help the country realise its economic dream.

LTWP has signed a 20 year Power Purchase Agreement with the government of Kenya through its electricity entity – Kenya Power.

The parties at the signing ceremony were represented by lead developer and independent power producer – Aldwych, which is majority owned by the Pan African Infrastructure Development Fund (PAIDF).

LTWP is primarily responsible for the financing, construction and operation of the wind farm and comprise a grouping of investors and lenders with extensive financial and technical capabilities and experience on the African continent.

The investors include FMO, Vestas, Finnfund, IFU and a strong local sponsor KP&P on the equity side.

The syndicate of banks is led by the African Development Bank and includes Standard Bank, Nedbank, EIB, DEG and Proparco.

The project will be located on one of the best sites for a wind farm in the world. Not only are the wind speeds exceptionally high but the wind is only from one direction, is not seasonal, and is low in turbulence.

The project site is situated on the southeast border of Lake Turkana, between two high ranging mountains in the Turkana Corridor, where a low level jet stream originating in the Indian Ocean creates favourable wind conditions.

Mahloele says the LTWP will essentially assist in diversifying Kenya’s energy mix and reduce the country’s reliance on oil and diesel power generators.

The Kenya government will save millions of dollars every year on importing fuel. The LTWP tax contribution to Kenya alone will be approximately $27m annually and $548m over the life of the investment.

Mahloele says the combination of international financial and technical expertise has ensured that the project is structured in a financially sound and sustainable manner, and in accordance with international standards.

kenya wind power1This project also forms part of Harith’s commitment to the United States backed Power Plan, announced last year by the US President Barack Obama to bring more than 10 000 MW of electricity to sub Saharan Africa.

Through Power Africa, Harith has committed $70m for wind energy in Kenya and $500m across the African power sector.

Mahloele says this investment is the result of the forward thinking and planning by the Kenyan leadership, who had undertaken comprehensive power sector reforms over the past decade.

In Kenya, electricity is mainly generated from hydro, thermal and geothermal sources. Wind generation accounts for less than six megawatts of the installed capacity.

Currently, hydro power comprises over 52 percent of the installed capacity in Kenya and is sourced from various stations managed by the Kenya Electricity Generating Company (KenGen).

“It is our assertion that the Lake Turkana Wind Project will greatly reduce Kenya’s over reliance on hydropower, which is playing a critical role in ensuring security of electricity supply, but is however vulnerable to periodic drought,” says Mahloele.

 

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