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The African Development Bank (AfDB)-managed Sustainable Energy Fund for Africa (SEFA) approved a US $992,000-grant to support the preparation of 7.8-MW hydropower project (HPP) in Kenya. The project is based on standard run-of-the-river technology, but features an innovative community ownership structure, where financial returns will also accrue to members of the Mutunguru community in Central Kenya, mainly due to a shareholding structure where communities actually receive a fixed small share of the project’s profits.
“This additional financial benefit is expected to translate into significant economic and developmental impacts in the project area, particularly in terms of socio-economic empowerment and job creation. This significant community ownership and support makes it deserving of the SEFA intervention as a model to be considered in future Bank operations,” stated Gabriel Negatu, AfDB’s Director-General for East Africa Regional Development and Business Delivery Office. SEFA support is instrumental in delivering a bankable project under such unique arrangement by providing: (i) legal support for setting up appropriate community arrangements; (ii) financial advisory; (iii) support to lenders’ due diligence; (iv) support to environmental and social impact assessment; and (v) institutional and management capacity building. The AfDB’s Africa Climate Technology Centre (ACTC) will also contribute to the institutional and management capacity building for the community.
This project will contribute to Government of Kenya objectives of expanding on-grid generation capacity, in particular through harnessing indigenous renewable capacity. Patrick Kimathi of the Mutunguru Hydroelectric Company Limited affirmed: “The Government of Kenya considers small hydro a top priority given the wide resource availability, baseload properties and ease of integration into the grid. Through building capacity of local communities to own and manage commercially viable grid-connected small hydropower projects, we support implementation of the Feed in Tariff Policy in Kenya to increase access to clean, affordable and sustainable energy.”
Mutunguru HPP will generate new income especially for women out of revenues from a renewable energy infrastructure project increasing of 115% the farmers’ revenue. It will also enhance job skills of rural women as they take on additional micro-economical activities besides the ones they are already dominating: tea plantations and dairy farms.
The project is fully aligned with the AfDB’s strategic goal to support inclusive and green growth by promoting access to clean, modern, reliable and affordable energy services in rural areas; and is well aligned with the Energy Policy as well as the strategy for the New Deal on Energy, by promoting energy access and renewable energy technologies. Finally, it is also aligned with the priorities of the AfDB’s Country Strategy Paper 2014-2018 for Kenya.
Launched in 2012, SEFA is a US $95-million multi-donor facility funded by the governments of Denmark, the United Kingdom, the United States and Italy. It supports the sustainable energy agenda in Africa through grants to facilitate the preparation of medium-scale renewable energy generation and energy efficiency projects; equity investments to bridge the financing gap for small- and medium-scale renewable energy generation projects; and support to the public sector to improve the enabling environment for private investments in sustainable energy. SEFA is hosted by the Energy, Environment and Climate Change Department of the AfDB.