General News
Kenya: Danish Group Buys Thermal Power Unit As Kenya Diversifies Its Sources
[ad_1]
Danish fund management firm AP Moller Capital has acquired an independent power producer (IPP) in Kenya at a time when the country is reducing the utilisation of expensive thermal plants with the ultimate aim of phasing them out.
Although AP Moller’s acquisition of IberAfrica is informed by the fact that the firm has 14 years to recoup its investments, given that Kenya Power has been cutting down on the use of thermal power makes the investment a gamble.
AP Moller, which focuses on infrastructure in growth markets, acquired the entire issued share capital of the 52.5MW IPP from Spanish power and gas utility firm Naturgy.
IberAfrica has a power purchase agreement (PPA) with Kenya Power for the plant that will expire in 2034, effectively guaranteeing the firm steady revenues for the next 14 years.
As part of plans to phase out thermal plants, the government last year refused to renew the license of IberAfrica’s after its PPA for another 56MW plant expired in September.
“The transaction represents AP Moller Capital’s first investment in Kenya, where we are planning to be an active long-term partner in the energy transformation, creating employment and driving foreign investments to advance the development and growth agenda,” said Lars Jakobsen, AP Moller Capital senior partner.
He added the Copenhagen-based firm had set aside $186 million for the deal and other investments in Kenya through its Africa Infrastructure Fund in which it has mobilised $982 million.
The fund targets infrastructure projects within energy and power sectors, including transmission, roads, rail and distribution centres. “Kenya is one of our focus countries with its sizeable, growing and well-diversified economy, and its strategic location in East Africa,” he said.
Improved energy mix
The investment, however, could be could be complicated by Kenya’s decision to reduce IPPs power uptake following significant investments in renewable energies particularly geothermal.
According to Kenya Power 2018 financial results, fuel cost decreased from $224 million in the year ending June 2017 to $219.5 million due to improved energy mix following less utilisation of the more expensive thermal plants.
However, during the year the units generated from thermal plants increased by 1.9 per cent from 2,165 GWh to 2,202 GWh.
Sign up for free AllAfrica Newsletters
Get the latest in African news delivered straight to your inbox
During the year, the energy mix remained relatively stable with contribution from geothermal sources increasing to 47 per cent 43.6 per cent the previous year. Hydro and thermal plants respectively contributed 30.1 per cent and 20.6 per cent of the total energy purchased.
“The increase in geothermal generation eased our overreliance on hydro power generation and mitigated increase in electricity costs by minimising dispatch of the expensive thermal power,” said Kenya Power.
Though utilisation of thermal power is on the decline, the 27 IPPs in Kenya operate on the comfort that they are entitled to a fixed-capacity charge of $0.04 per kilowatt-hour whether generating electricity or lying idle.
The amount is passed on to electricity consumers as a fuel cost charge, which fluctuates depending on the amount of fuel used in power production and currently stands at $0.03 per unit.
The fuel cost component accounts for as much as 40 per cent of what consumers pay for electricity.
Kenya has announced plans to phase out electricity generation from the thermal plants and has no intentions of renewing the licenses of the 27 IPPs whose total capacity stands at 802MW, a significant portion considering the country’s total installed capacity stands at 1,429MW.
Among IPPs gearing for a shut down in the near future are Tsavo Power’s 74MW plant whose license expires in September 2021 and 60MW Kipevu plant whose contract ends in July 2023.
[ad_2]
Source link
Comments
Rayvanny officially leaves Diamond’s WCB Wasafi after 6 years
Raila Odinga is the most popular presidential candidate, a survey released by Infotrak
Newly-crowned Kenyan Wimbledon champion Angella Okutoyi would like to play against American star Serena Williams
The Mombasa High Court has ordered IEBC to clear Sonko to run for the Mombasa governorship.
A new born baby was pulled out of latrine in Mururi.
Kenyan Rapper Colonel Mustafa has leveled fresh accusations against his ex-girlfriend Katoto.
Okutoyi and Nijkamp qualify for Wimbledon Open final
Fans will have to brace themselves for a sober 90 minutes, the Gulf Arab state announces.
Angola’s longest ruler dos Santos dies at 79
