UK firm Globeleq is set to start construction of a power plant at the Menengai geothermal fields, ending the long wait for electricity production from the area.
Construction of the 35 megawatt (MW) plant, which is projected to cost Sh13.39 billion ($108 million), is expected to start by next month and be completed by 2025.
The company yesterday said it had executed an engineering, procurement and construction (EPC) contract and a long-term service agreement (LTSA) with Toyota Tsusho Corporation (TTC) for the project.
Globeleq Chief Executive Mike Scholey and Chief Operating Officer for Africa Division of Toyota Tsusho Kazumasa Kimura signed the agreement in Tokyo yesterday.
Globeleq said the investment is part of the Sh500 billion deal agreed between President William Ruto and the UK Prime Minister Sunak during the 27th UN conference on climate change in Egypt last year.
"Menengai will be Globeleg's forst geothermal plant and will contribute to reducing the cost of power in the country. Having signed these key project agreements with TTC after achieving a fully committed financing about a month ago, we will now work with the government of Kenya to reach financial close and start construction as soon as possible,” said Mr Scholey in a statement.
“The project will deliver clean and cheap baseload power to the national grid and enable GDC to monetise the available steam resources from the Menengai steam field.”
Globeleq, which is owned 70 per cent by British International Investment and 30 per cent by Norway’s Norfund, also owns the 40MW Malindi Solar Farm that started feeding the national electricity grid in late 2021.
It also develops plants and produces power in other African countries.
At Menengai, the firm will buy geothermal steam for power generation from GDC and sell the electricity to Kenya Power under the 25-year agreement.
Globeleq signed financing agreements in December 2022 with the African Development Bank, the Eastern and Southern African Trade and Development Bank and Finnfund for $72 million (Sh8.93 billion) in financing for the project from the lenders.
“Construction of the project is expected to commence during the first quarter of 2023 once financial close has been reached. Globeleq will operate and maintain the power plant once it reaches commercial operations in 2025,” said the company in the statement.
Globeleq got into the fields in 2021 after it acquired a controlling stake in Quantum Power East Africa (QPEA), which was among the three Independent Power Producers (IPPs) that had been selected to set up power plants in Menengai.
The three IPPs are expected to build power plants at Menengai with a combined generating capacity of 105MW or 35MW each. The other companies are Sosian Menengai Geothermal Power and Orpower 22.
GDC drilled geothermal wells and later built the steam gathering systems as it sought to derisk the area.
Private power firms have previously cited the high cost of geothermal exploration as among the factors that have led to the slow development of geothermal as an electricity source in the country.
This is despite the huge potential as well as lower costs of the energy source. This necessitated the formation of GDC, which would bear the initial risks and costs.
After derisking the Menengai fields in 2013, GDC competitively selected three firms that would set up power plants in a Public Private Partnership model.
The companies, however, experienced difficulties in raising capital to construct the power plants. It is only in recent months that there has been some movement towards putting up the plants.
Globeleq’s other power production venture in the country is the Malindi Solar Power Plant. The plant, which was commissioned in December 2021, has been feeding about 40MW to the national electricity grid.
Between then and June last year, the solar plant sold electricity worth Sh714 million to Kenya Power, according to the electricity retailer’s annual report.
