[Dehai-WN] Theeastafrican.co.ke: Multinationals scramble for contracts

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From: Berhane Habtemariam (Berhane.Habtemariam@gmx.de)
Date: Sat Sep 10 2011 - 16:34:25 EDT

Multinationals scramble for contracts

By CHRISTINE MUNGAI ( <javascript:void(0);> email the author)

Posted Saturday, September 10 2011 at 18:36

Four major international firms are among 19 companies jostling for a piece
of Kenya's rich geothermal potential, as the country seeks renewable energy
sources to end its current power woes.

Japan's Mitsubishi Corporation and Toshiba Corporation, US-based General
Electric Company, and France-based Alstom SA, along with 15 other companies,
have placed bids with Kenya's state-owned Geothermal Development Company
(GDC) to develop eight 100-Megawatt steam-powered power plants in the
Bogoria-Silali geothermal block in the country's Central Rift region.

According to GDC's chief geologist John Lagat, construction of the eight
power plants in Bogoria is expected to start as early as January next year
and be completed in 2017 at a cost of Ksh291 billion ($3.1 billion). The
project's major financier is the World Bank, along with the government of

Speaking at an African Rift Geothermal Development Facility (ARGeo) meeting
held in Nairobi recently, Kenya Electricity Generating Company (KenGen)
managing director Eddy Njoroge said the pertinent need at the moment was to
fast-track the exploitation of the region's geothermal deposits.

"We need to accelerate progress and put our plans into action," said Mr
Njoroge. "The focus now should really be on output: The drilling of wells,
and not so much on the process or framework to make things happen."

Kenya, which has the region's greatest geothermal potential, is expected to
provide a model that can be replicated in the other ARGeo member states -
Djibouti, Eritrea, Ethiopia, Uganda and Tanzania. Despite the high
geothermal potential of the African Rift, only Kenya and Ethiopia have
installed geothermal capacity of about 210 MW. The government of Kenya
anticipates that geothermal power will generate 30 per cent of the country's
additional electricity over the next 20 years.

The ARGeo meeting, convened by United Nations Environment Programme (Unep)
along with GDC, Kengen and the government of Kenya, brought together
ministers of energy and mines from across the region as well as technical
experts from the Icelandic International Development Agency, the German
Federal Institute of Geosciences and Natural Resources (BGR) and the
International Atomic Energy Agency (IAEA).

ARGeo's current project fund is worth about $18.6 million. Iceland will
provide about $2.5 million spread over five years for technical assistance
and training, equipment pool management while BGR will contribute about $2.8
million for various exploration projects in Ethiopia, Kenya, Tanzania and
Uganda. The IAEA will provide support in isotope data analysis and
laboratory assistance.

High capital cost is one of the major constraints to the development of
geothermal energy, but GDC's managing director Silas Simiyu was optimistic
that the country can attract enough investors. In this financial year,
geothermal development received 24 per cent of the $730 million that was
allocated to the energy sector by the Treasury.

"We are currently drilling two wells in Menengai, and two other wells have
already been completed. The fact that the government allocated that kind of
money is a show of commitment that is encouraging for investors, so they
will be more willing to come on board," he said.
The French Development Bank (AFD) gave the Menengai project a much needed
shot in the arm in June when it loaned the GDC nearly $70 million for the
purchase of two additional rigs, rig ancillary equipment, and staff

About $13million of the ARGeo kitty will be reserved for the Risk Mitigation
Fund, which is intended to provide partial compensation of the costs
incurred in case wells drilled fail to produce the energy expected.

"The fund is meant to cushion investors in case they drill in an area with
poor reserves. But Kenya has very high reservoirs, so investors bringing
their money into the country are unlikely to be disappointed. We don't
expect Kenya to use any of that Risk Mitigation Fund," said Mr Simiyu.

Analysts say that exploiting geothermal potential in the region could be
solution to the region's power woes. Kenya and its neighbours, Ethiopia,
Uganda, Rwanda Djibouti, Tanzania, Burundi and the Democratic Republic of
Congo, are said to be sitting on the hotbed of geothermal activity -- with a
geothermal power potential estimated to be in excess of 15,000MW.


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