IFC, a member of the World Bank Group, is investing €28.1 million in Thika Power Ltd. to help develop an Independent Power Project (IPP) near Nairobi, Kenya. Thika Power will sell all output to the national distributor, Kenya Power and Lighting Company, increasing the supply of reliable electricity in the country.The 87 megawatt power plant will use heavy fuel oils (HFO), to help diversify Kenya’s electricity away from hydropower. During times of drought, when hydropower drops in supply, Kenya has had to turn to costly emergency power. HFO power plants are a quicker and viable option to address the energy deficit in Kenya, given the relatively long development period of other sources like geothermal energy and coal.
The Thika project is a result of the Kenyan government’s tender of three power plants in 2009, to encourage private sector participation in electricity supply. Thika Power is a subsidiary of Melec PowerGen Inc., and an affiliate of the Matelec Group of Companies from Lebanon. IFC is also investing in another winning bidder, Gulf Power Ltd."With the massive growth in energy demand in Africa, Independent Power Projects can add reliable and sustainable capacity to the power network," said Samer Nasr, Managing Director of Melec PowerGen Inc. “To successfully implement an IPP, you need a partner with extensive knowledge and experience, as well as a country that enjoys stability and has the required structures. We believe KPLC and Kenya have all of these, and are leading the way in the development of electrical infrastructure in sub-Saharan Africa."
Jean Philippe Prosper, IFC Director for East and Southern Africa said, “Thika and the recent series of independent power projects in Kenya demonstrate how the private sector can help the government meet growing demand for electricity. The choice of heavy fuel oils will further diversify Kenya’s energy sources, making power generation more stable.”IFC, the Multilateral Investment Guarantee Agency (MIGA) and the International Development Association (IDA) closely collaborated on the Thika Power project, with IDA providing a Partial Risk Guarantee to facilitate the loan. Total cost for the Thika power plant is estimated at €112.4 million. Alongside IFC, the African Development Bank (AfDB) and Absa Capital will contribute €28 million to the project.The World Bank estimates that power shortages currently cost the Kenyan economy 2 percent of GDP growth. Increasing power generation is at the heart of both the Kenyan Government and IFC’s strategy for infrastructure development. IFC will invest $1 billion in infrastructure projects in Africa in fiscal year 2012, up from $200 million five years ago.