The World Bank and Kenya government this week signed a partial risk guarantee to cover the energy private sector investors to the tune of US$47 million.Permanent Secretary of the Finance Ministry Joseph Kinyua told journalists in Nairobi that the deal will add another 87 Megawatts to the national grid. “The World Bank and the Kenya government has reached a 47- million-dollar agreement that will see the private sector increase its participation in energy generation,” Kinyua said during the signing ceremony.The events come a month after the government commissioned the construction of a geothermal power plant in the country’s Rift valley which contains a potential of over 7,000MW of green power. The secretary said that under the agreement government will provide a letter of support to the Thika Power in order to build a thermal power plant in Nairobi. According to the ministry, Independent Power Producers (IPPs) have been demanding payment security from national distributor Kenya Power which has already provided the security to three private power investors. “It is not possible due to legal framework to issue government guarantees as it will compromise debt sustainability benchmarks,” the treasury official said.World Bank’s Director for Kenya Johannes Zutt said that his institution will send a guarantee letter of credit issued by Citibank to the IPP. Zutt noted that under the framework the Multilateral Insurance Guarantee (MIGA), which is part of theWorld Bank has committed to provide an additional termination and political risk to the IPP amounting to 49 million dollars. The official added that the International Development Assistance (IDA) which belongs to the World Bank has also signed a project agreement with Thika Power.According to the World Bank, it provides Partial Risk Guarantee (PRGs) to Citi Bank when it issues a letter of credit to the IPPs. “The 47 million dollars are part of the 166 million dollars that the bank has earmarked to Kenya’s energy sector,” he said. Zutt said that bank hopes to leverage 400 million dollars from the private sector in order to connect an additional 285 MW in the electricity grid. “The PRGs are designed in order to provide minimal support to the IPPs given Kenya Power’s history of timely payments of energy producers,” he added.Permanent Secretary in the Ministry of Energy Peter Nyoike said that there are five IPPs that are in the process of undertaking power projects. “The Lake Turkana wind Project is under negotiations with the World Bank but the preliminary timeline is that in 28 months, the first phase will be connected to the national grid,” he said. The ministry of energy said that the government approached the World Bank last May in order to provide letter of support. “The signing of the agreement shows that the bank will continue to support our efforts to increase electricity access to all areas of Kenya,” Nyoike said. He added that guarantees will cushion the IPPs in the event that Kenya’s power is unable to it’s fulfill its payment obligations.Agencies
