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Thika Thermal Power Project


Overview

  • Reference: P-KE-FAA-001
  • Approval date: 04/11/2015
  • Start date: 19/10/2012
  • Appraisal Date: 10/10/2011
  • Status: OngoingOnGo
  • Implementing Agency: Thika Power Limited
  • Location: KENYA

Description

Construction and operation of an 87 MW thermal power plant located on land owned by the Kenya Power and Light Company (KPLC) in the Athi River region 35 km from Nairobi. The plant comprises 5 heavy fuel oil generators that can be convertible to natural gas (if gas becomes available) plus a 7 MW steam turbine. The project will supply electricity to KPLC under a 20 year PPA at a tariff of 7.4 EUR cent/kWh (covering fixed costs and variable OM cost).


Rationale

Currently, Kenya has an effective electric generating capacity of approximately 1,342MW. Peak demand has steadily increased from 987 MW in 2006/07 to 1,036 MW in 2007/08 rising to 1,172 MW at the end of 2009. Based on the Least Cost Power Development Plan (LCPDP), the country will require additional installed electric energy capacity of 2,396 MW by year 2020. Kenya is also seeking to diversify its energy sources, which are currently concentrated in hydropower. The contribution from hydro generation decreased from 65% in 2007/08 to 40% in 2008/09 due to recent drought. Thermal generation increased only from 29% to 31%, which was insufficient to fill the gap left by hydro power declining. The Nairobi region is currently using 60 MW of costly emergency power provided by small diesel generators. The emergency power will be replaced by the new thermal plants around Nairobi including Thika. This Project will al so help supply the nearby town of Thika that requires 40 MW and is growing.

While supply is restricted due to the decrease in hydro generation, the Country's goal is to increase access to electricity from 18% currently to 40% by 2020. Ongoing and planned projects including the Lake Turkana wind project, thermal projects such as this one, geothermal projects and cogeneration are expected to increase Kenya's installed capacity by 2015 in line with the new government strategy to diversify its electricity generation capacity. However, the geothermal and wind projects will only come be operational in about two to five years or more, and demand is outstripping supply. This Project is therefore an essential part of Kenya's strategy to satisfy demand for reliable power and increase access to power from a low base.

MPG will sign a PPA agreement with KPLC that will guaranty off-take for the energy produced by the generator for 20 years, and will significantly minimize the risk of competition within the energy sector.

The Project is a key part of Kenya's strategy to invest in reliable, dispatchable thermal plants to balance the existing hydro generation and future large wind power projects. Such wind projects cannot be successful without thermal projects such as this that are available even when there is no wind. As highlighted above the current demand outstrips supply and this presents a good opportunity for the sponsor to undertake this project. Furthermore the sponsor already has experience in developing power projects of similar technology in Africa.


Key contacts

AMMAR Tarek Saleh Mostafa - PESD0


Costs

Finance source Amount
ADBEUR 23,647,426
Co-financierEUR 50,408,570
DeltaEUR 74,055,996
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