AU Commission injects Sh730m in geothermal project

November 27, 2013
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, NAIROBI, Kenya, Nov 27 – The Africa Geothermal International Kenya (AGIL) on Wednesday signed a Sh730 million (USD 8.4 million) grant with the African Union Commission (AUC) to facilitate the exploration of geothermal resource in Longonot.

Africa Geothermal international President and Chief Executive Officer Fassine Fofana said they were targeting to produce more than 140 megawatts of renewable electricity.

Africa Geothermal international President and Chief Executive Officer Fassine Fofana said they were targeting to produce more than 140 megawatts of renewable electricity/FILE
Africa Geothermal international President and Chief Executive Officer Fassine Fofana said they were targeting to produce more than 140 megawatts of renewable electricity/FILE

“The drilling is at a cost of Sh3.1 billion (USD36 Million) and this funding comes in handy,” he said.

Fofana said they have completed the environmental assessments and obtained the required permits to begin an exploratory drilling program for the presence of a commercially viable resource.

He said the full construction of the 140MW plant is at a cost of Sh52 billion and will employ up to 1,000 people.

“As a private sector project, Longonot will bring much needed investment into Kenya without burden on the taxpayers Geothermal power is among the lowest cost power available in Sub Saharan Africa and is cost effective without subsidies. It is estimated that during the construction phase, the Longonot geothermal project will employ up to 1,000 people,” he said.

He said the geothermal project is in line with the government’s commitment to produce 5,000 megawatts of geothermal power by 2018.

“As a renewable source of energy, drawn from a domestic source, the Longonot geothermal project will contribute significantly to Kenya energy pool and help reduce the average price charged to the Kenyan consumer. This will be achieved by displacing relatively more expensive fossil fuels-based power,” he said.

In July 2009, the Ministry of Energy awarded AGIL a Geothermal Resource License in Longonot, in the Rift Valley area of Kenya.

The license covers a concession area of 132km and allows AGIL to build a geothermal power plant and to use the geothermal resources within the Longonot concession area for a period of 30 years from the effective date of the Power Purchase Agreement (with option for a five year extension).

AGIL signed a Power Purchase Agreement (PPA) with Kenya Power and Lighting Company (KPLC) in April 2013. Under the PPA, AGIL will supply 140MW of base load geothermal power to Kenya Power by 2017.

“Under our current agreement with Kenya Power we are scheduled to deliver power by 2017, however we discussed with the government to split that in two phases – the first 70 MW by 2016 and then the remainder by 2018,” said Fofana.

Fofana said the company is set to raise the rest of the money through local and international investors.

“My team is talking today to some investors in Kenya but we are also looking for investments from the international market,” he said.

The development of the scheme will consist of the following: A main power plant, with cooling towers, a turbine hall, transformers, a switchyard, and administration and maintenance buildings; A steam field, comprising pipes connecting approximately 17 well pads for wells that take steam out of the ground, or return condensed steam back to the ground; and A series of connecting access roads around the site.

The AUC grant is in partnership with KfW Bank group with the financial help of European Institutions under the Geothermal Risk Mitigation Facility (GRMF).

“The objective of the GRMF is to act as a catalyst for geothermal development for East Africa and not only is this grant a significant portion of the exploration funding, the GRMF is an independent assessment of the project.

This was the first round that GRMF has granted funds.

GRMF financially supports infrastructure grants of up 20 percent of the costs for infrastructure for surface studies drilling programmes that includes access to roads, water and power.

They also finance grants of up to 80 percent of the costs of surface studies grants, drilling grants of up to 40 percent of the costs for the exploration drilling and testing programme for reservoir confirmation wells (excluding infrastructure costs) as well as Continuation Premium of up to 30 percent of the developer’s share for the drilling and testing programme in case developers wish to continue with project (depending on the availability of funds).

In the first round GRMF has already awarded grants to five projects in drilling and one in surface study grants, of the five two projects are from Ethiopia and three of them are from Kenya.

The projects include a surface study by geological survey of Ethiopia at Dofan (Ethiopia), Reykjavic Geothermal drilling at Corbetti (Ethiopia).Geothermal Development Company drilling at Bogoria – Silali and Suswa drilling by walAm Energy Inc.

African countries have been invited for the Second Application Round that started in October 2013 and applications will end on December 3, 2013.

Countries eligible include Djibouti, Eritrea Ethiopia, Kenya Tanzania, Uganda, Zambia, Rwanda, Burundi, DRC Congo and Comoros Island.

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