Category Archives: Japan

Kengen the Geothermal Powerhouse

Kenya is the only African country that has successfully tapped the green energy potential of geothermal power and is ranked number eight in the world. Kenya’s 676MW geothermal output trails that of the USA (3,567MW) Philippines, Indonesia, New Zealand, Italy, Mexico, Turkey, and ahead of Iceland, and Japan.

The bulk of this geothermal power comes from the Kenya Electricity Generating Company (Kengen) which supplies 1.6GW (80%) of the country’s 2.3GW electricity output. Of that 533MW is from geothermal energy, primarily from the Olkaria area near Naivasha, where the first wells were dug in 1950 and their deployment and production accelerated after 2007.

Kengen has 294 drilled walls with an 80% success rate, and part of that leap has been due to a Kengen-pioneered “wellhead technology”, which was done in partnership with Green Energy, an Icelandic company. Wellhead technology allows Kengen to tap steam energy within a year or two of sinking a well and recoup their investments faster (it usually costs $6 million to dig a well). In all, Kengen generates 75MW from 7 wellhead stations at Olkaria and one at Eburu.

Kengen’s Olkaria IV geothermal power plant.

In terms of electricity generation, Kengen plans to have supply stay ahead of demand especially considering the long setup time for energy plants (about seven years). With funds raised from shareholders and investors in 2016, they plan to add 1,000 MW to reach 1,745MW by the year 2025.

Kenya has an estimated 10,000 MW of geothermal power potential, and geothermal steam allows high energy demand manufacturing such as steel, cement and glass processing take place. These are currently hampered by the high costs of electricity, but the separation processes of geothermal gases means that such companies can tap steam to use at their factories nearby and this is the strategy behind a planned Kengen industrial park at Olkaria, Naivasha. Already Oserian Flowers buys steam and pipes it to heat their greenhouses in the nearby area.

As at  June 2017, Kengen had a diversified mix of installed energy sources comprising Hydro 818 MW (including Masinga 40 MW , Kamburu 94.2MW, Gitaru 225MW, Kindaruma 72MW, Kiambere 168MW, Turkwel 106MW,  Sondu 60MW,  Sangoro 21.2MW, Tana 20MW), Geothermal 534 MW (Olkaria I 45 MW, Olkaria II 105MW, Olkaria IV 149.8MW, Olkaria I AU 150.5MW), Thermal 253.5 MW (Kipevu I 73.5MW, Kipevu III 120MW, gas turbines 60MW) and wind power 25.5MW (three phases at Ngong Hills).

Kenya has a liberated energy production market, and other private sector players in the geothermal sector who are seeking support under a private-public partnership program include Sosian Power, Quantum Power, and Akiira, as wells as Africa Geothermal and Orpower who are close by Kengen’s fields at Olkaria.

Lessons for Kenya from a Japan Postal IPO

The Kenya government just announced a $600 million 2 year syndicated loan that will have  Citi, Standard Bank and Standard Chartered Bank as bookrunners and lead arrangers.

But as there’s concern of the ballooning government debt levels, is it time to turn to other sources of funding? Some have suggested the government sell off shares in companies it has such as Safaricom.

An example comes from Japan where their government is about to have what’s expected to be the largest IPO of 2015. According to this WSJ article;

  • In addition to running 24,000 post office branches, parent company Japan Post Holdings operates Japan Post Insurance, the country’s largest insurer–and Japan Post Bank–one of the world’s biggest banks by deposits, with $1.67 trillion.
  • The Japanese government is raising nearly $12 billion from the sale of 11% of three entities – its postal, banking and insurance units.
  • Most of the money raised from the sales will be used to help finance recovery efforts after the 2011 earthquake and tsunami.
  • 80% of the shares in Japan Post Holdings will go to domestic investors, while the remaining 20% are earmarked for international investors.

More Aid to Kenya

From Norway (a GJLOS Project)
Through the World Bank, Norway is funding a pilot project for the recording of court proceedings. Firms with extensive experience are invited to supply and install digital voice processing systems in some courts by applying electronically from johnson.weru@legalsector.or.ke by 27th May 2005.

From EU for Kenyan Roads
European Union support to Kenya roads i.e the Northern Corridor Rehabilitation Programme include:
– Sultan Hamud to Mtito Andei (131 km) at a cost of Kshs. 4.6 billion began in April 2003, and 72km are complete. – the rest should be done by January 2006
– Mai Mahiu – Naivasha – Lanet 95 km road section at a cost of Kshs 4.6 billion – to commence in May 2005 and end in September 2007 urgently needs to be done
– 150km of rural roads in Eastern province at a cost of Kshs. 300 million (complete)
– EUR 35 million to rehabilitate Westlands– Limuru and Timoboroa-Eldoret-Malaba highways urgently needs to be done
– Rural roads in tea & coffee producing areas of Central Kenya

From Japan
The Government of Japan has provided a grant of 1 billion yen (¥) (Kshs 720 million) in an import support program to finance import of raw materials and finished goods. Goods purchased don’t have to be of Japanese origin, but the funds may not be used for project funding. The minimum loan amount is ¥ 14.4m (Kshs 10.4 million), and the maximum is ¥108m (Kshs 77.8 million). Other terms are: payment in Kshs, 10% deposit to treasury on approval of application, balance (90%) payable within one year from date of shipment of goods, secured by bank guarantee. Apply at crownagents@ke.crownagents.com