Ngigi Kamau, Alternative Energy Africa Kenyan Correspondent
The Kenyan government has requested that the German-owned development bank KfW chip in and consider financing a risk mitigation fund to facilitate progress for geothermal exploration in the country.
Describing risk associated with geothermal drilling as great, the country’s energy minister Kiraitu Murungi told journalists in Nairobi that once in place the €75 million fund will be used to underwrite dry wells in the event no steam is discovered.
The country’s Geothermal Development Company (GDC) is spearheading a plan to generate 1,000 MW of geothermal energy by 2018 with the first phase set to generate 400 MW in the Menengai crater located 10 km north of Nakuru, the fourth largest city in Kenya.
“The risk fund will cover 20% of the preliminary costs used by firms during the drilling of wells” the Minister said last week in the capital Nairobi when he met with German investors led by KfW Bankengruppe Chairman Dr. Ulrich Schroder.
"To give assurance to financiers interested to invest in development of steam in our geothermal fields, it will be necessary to have some risk fund so that they don’t lose their money," Murungi said.
In order to power the country’s vision 2030, GDC is targeting 120 steam wells by 2014 which according to GDC Managing Director Dr. Silas Simiyu, should channel the first 400 MW to the national grid.
“An additional 600 MW is expected by 2016 and another 1000 MW by 2018,” Simiyu told Alternative Energy Africa at an earlier interview in Nairobi. “Selection of suitable investors as well as issuing of environmental and social impact assessment license is set to be completed by November 2011,” he said.
The contract award will be given to the investors that successfully negotiate a Power Purchase Agreement (PPA) with Kenya Power and Lighting Co. Ltd., secure a generation license from the Energy Regulatory Commission, and conclude a steam fuel supply agreement with GDC.
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