Category Archives: LAPSSET

Coal Energy in Kenya

 

 

 

This week, there was a debate on the future of coal in Kenya and its place in the energy mix for the country. It took place at the Strathmore (University) Extractives Industry Centre (SEIC) Nairobi, and was co-hosted by WWF Kenya). The government plans to put up a coal plant on maInland Lamu and a private developer Amu Power was selected to build it, and is seeking approval from the energy regulatory commission to commence construction.

Excerpts:

Coal around the world

  • There are 3 new coal plants in Africa, and Japan & Korea will build 60 new ones to replace their old coal & nuclear ones.
  • There are now more global jobs in solar than coal, and solar has gone from 1 GW production in 2003 to 70 GW this year.
  • Trump got votes from Appalachian coal states where jobs were lost. But coal shares are down as gas has replaced coal.
  • With or without Kenya, the world is going green – Ethiopia aims to get to 100% renewable., Germany gets 20% renewable (all in the last 8 years), US has gone from 2 to 7% renewable (in 10 years), South Africa gets 2 GW from solar, and Rwanda’s 8.5MW solar is the largest in the region.

Lamu

  • No projects happen at Lamu because NGOs on the beach want it to stay marginalized and oppose port, coal, roads etc.
  • Lamu has high unemployment leaving youth exposed to Al-shabab & drugs. This project will have 1,800 jobs for locals.
  • It is not the job of private company to create jobs or improve security in Lamu – that is the government’s role
  • “Save Lamu”  groups oppose the plant because all its side-effects have not been quantified,  and it will destroy far more (fishing) jobs than it creates.

Other Sources and Energy Mix

  • Amu Power’s 1050 MW will add 50% to Kenya’s 2,200 MW electricity from the coal plant that is 20 kilometers from Lamu town.
  • A country’s rate of development depends on availability of cheaper and reliable energy supply. Developed countries get 60% from coal/nuclear and just 3% from renewables on average.
  • Solar is okay for isolated homes, but it will not recover the cost of national power generation and distribution.
  • Geothermal costs $4-5 million per well per well & each one generates 5MW – so how many can Kenya get? It’s very expensive for government & IPP’s who often sink many dry wells
  • Geothermal depends on nature to generate the steam and you can’t tweak the inputs, unlike with coal & nuclear where you can vary the inputs to match demand.
  • Industries need coal. Moyale which gets electricity from Ethiopia hydro only has supply three days a week
  • Even today people on the grid will not turn on electric cookers – the main energy sources in Kenya are charcoal and wood, and the are larger pollutants than coal.
  • Kenya imports all glass because we don’t have the energy to make glass.
  • Coal is Kshs 7.5 per unit compared to kshs 20 from diesel-fired plants.

Environment

  • The US has lake signs that “if you fish here, don’t eat the fish” – Kenya will likewise have to monitor coal pollution risks
  • Kenya emissions (excluding extractives) will be 150 MT of carbon by 2030 and the government has committed to reduce this by 30%. How?
  • How will the plant dispose of the ash, carbon dioxide and acid rain? Lamu does not have infrastructure
  • An EIA (environmental impact assessment) audit process in Kenya is a compromised one. They are done by auditors hired by investors and will never oppose projects.
  • Amu Power will use three new clean coal technologies at the plant.
  • The government must check that industry and investors comply with environmental standards – there was a toxic battery factory in Mombasa. County and national governments need to do their own monitoring.
  • Energy projects are financed by lenders have strict conditions.e .g IFC/World Bank finance  many thermal plants, and they can’t allow plants that compromise commitment. The Amu power one is guaranteed by the African Development Bank.

Oil Pipeline, Economics & Politics

It’s been reported that the oil pipeline from Uganda is going to go through Tanzania, not Kenya. Two forgotten facts about the Uganda oil decision are that; (1) President Museveni of Uganda has been steadfast that he wanted to refine oil in Uganda, not export raw crude (2) Uganda’s oil has been said to be waxy or heavy. This means it would require complex heating to keep it flowing along a complex oil pipeline through the rift valleys and hills – to the coast of Kenya.

M7 poster 2

The cost, insecurity and difficulty of building infrastructure have been cited reasons that Uganda opted to go through Tanzania. Still Kenya has several LAPSSET projects on the cards including an oil pipeline to go to Lamu where there would be a new highway, railway, coal plant and modern, deep-sea port.

Pipeline Impact

Last year at the TDS Nairobi summit, during the 10th  Ministerial Conference (MC10) of the World Trade Organization (WTO), a session was held on local content in extractive (and oil) industries. Some interesting comments there included:

  • It is a legitimate objective for any resource rich country to try to maximize the value of its resources.
  • If a country puts restrictions on raw exports, it may distort the local economy; it creates artificial demand – and if it is not efficient, local related industries will not survive.
  • Kenya energy expert Patrick Obath suggested that Kenya, Uganda and South Sudan have to talk together and implement projects together for projects like the oil pipeline to be viable. That would also have to happen to get more value-addition from the oil in the countries e.g. can the countries plan to get fertilizer from oil?
  • With mining, you have 20 years of opportunity for local suppliers and jobs, but with an oil pipeline that’s only there in the beginning, then goes away once the pipeline is built (there wont be many local jobs after, and communities don’t get an economic boom from having an oil pipeline passing through their land..which may lead to some local frustration).

More on Kenya Pipeline:

oil tankers

  • The Kenya Pipeline Company is charged with transporting and storing of petroleum products.
  • A (presidential task force on parastatal reforms proposes the Treasury incorporate a holding company known as the Government Investment Corporation (GIC), into which Kenya Pipeline Company should be transferred to determine (its) intended privatization.
  • Meanwhile Kenya Pipeline is continuing with its projects including replacing the current Mombasa-Nairobi Pipeline.

Almasi & Coca Cola

Almasi, the holding company for three Coca Cola bottling plants (Mt. Kenya Bottlers, Rift Valley Bottlers, Kisii Bottlers), had 2014 revenue Kshs 6.7 billion (up from 5.8 billion) and a pre-tax profit of Kshs 516 million (up from 256M). The company, which is 51% owned by Centum Investments, will pay out a dividend of 0.12 per shares (total Kshs 92 million) to shareholders.

The company has installed a new, and faster, glass bottling line and will launch a plastic bottling one at Nyeri in 2016, in line with trends in the beverage business where plastic, not glass bottles, are the preferred buy choice by consumers.

Almasi distributed about 29% of the Coca Cola products in Kenya, equally spread by the three plants and they see the governments plans for Northern and Eastern Kenya where improvements in infrastructure (around LAPSSET) and security over the next few years as an opportunity to open up new markets for their products.

The company also has a few tax claims from the Kenya Revenue Authority, but the directors don’t feel they will materialize.

$1 = Kshs 102