Lake Turkana Wind Power Project nominated Power Deal of the Year in 2014

19/12/2014
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The Lake Turkana Wind Power Project (LTWP) reaches financial close following an eight-year journey.

Earlier this month, the EUR 623-million project marked a significant milestone with financial close, making it the largest private investment in Kenya’s history. This project has won several awards and has been recently nominated as the ‘African Renewable Deal of the Year 2014’ by Thomson Reuters Project Finance International.

The Turkana project comprises a 300 MW Independent Power Plant to be constructed, owned and operated by Lake Turkana Wind Power company and a 428-kilometre transmission line to connect the power station to the power grid to be constructed by the Government of Kenya. The African Development Bank (AfDB) Group is supporting the project through African Development Fund and African Development Bank instruments and has been extensively involved since 2007; working closely with the project sponsors and the Government of Kenya to structure this transformational integrated project.

Potentially Africa’s largest single wind power project to be constructed, Lake Turkana has attracted financial support from the African Development Bank (AfDB), European Investment Bank (EIB), the Standard Bank of South Africa, Nedbank, Netherlands Development Finance Company (FMO), Proparco, East African Development Bank (EADB), PTA Bank, EKF, Triodos and DEG. The project’s debt-raising for the generation project was led by the AfDB, as Mandated Lead Arranger, with the Standard Bank of South Africa and Nedbank Limited as co-arrangers.

As the Mandated Lead Arranger for the power plant, the AfDB arranged approximately EUR 436 million of senior loan facilities and approximately EUR 37.5 million of subordinated loan facilities for LTWP. The Government of the Netherlands has also provided a grant of EUR 10 million and the European Union a further EUR 25 million, through the EU Africa Infrastructure Trust Fund. This project is a great example of Development Finance Institutions working together with commercial banks to develop Africa.

Additionally, the AfDB is providing a EUR 20-million ADF Partial Risk Guarantee (ADF PRG) for the transmission line component, to protect the power plant against the risk of 400-km Suswa-Loyangalani transmission line and substations construction delay. This is the AfDB’s first PRG transaction. The transmission line and related substations are financed by the Government of Spain and Government of Kenya. The PRG was a key condition for access to long term debt and ‎financial close for the power plant. 

Donald Kaberuka, President of the African Development Bank Group highlighted the importance of this transaction and stated that: “This project underscores the Bank’s role to act as a catalyst for the development of transformative infrastructure projects of this nature.”

The signing and disbursement signifies the completion of the project’s financing with financial close achieved on December 11. Construction of the Lake Turkana project is expected to commence this year and will begin producing power in early 2016, adding 300 MW to the Kenya national power grid.

LTWP is a key deliverable under the Kenyan Government’s commitment to scaling up electricity generation to 5,000 MW and to provide cost-effective renewable power to the Kenyan consumer. This project alone will produce approximately 20% of Kenya’s currently installed capacity at €7.52 cents/kWh (Ksh9/kWh). It is also a Vision 2030 flagship project and will be transformative in terms of the development impact in the northern arid areas of Kenya, to the Kenya’s electricity sector, and to the country as a whole. It is also expected to generate up to US $150 million annually in foreign currency savings to Kenya through fuel displacement costs.