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Projects

Summary of proposed guarantee

Summaries of proposed guarantees are provided prior to Board consideration and before final contract signing, and they are therefore subject to change. Project briefs are disclosed after Board consideration and contract signing and reflect the terms of the project at the time of contract signature. Environmental and Social Review Summaries are provided for projects assigned an Environmental Assessment Category of A or B.

 

Project name
Gulf Power Limited
Project ID
10646
Fiscal year
2014
Status
Active
Guarantee holder
Standard Bank
Investor country
South Africa
Host country
Kenya
Environmental category
A
Sector
Power
Date SPG disclosed
February 27, 2014
Project Board date
April 29, 2014
Gross exposure
 $43.7 million
Project type
Non-SIP
Strategic priority area
Complex Project
South-South
IDA

Project Description

This summary covers financing from Standard Bank of South Africa to Gulf Power Limited in Kenya. Standard Bank has applied for a MIGA guarantee of €31.9 million ($43.7 million equivalent) for a period of up to 20 years against the risk of war and civil disturbance.

Gulf Power Limited is developing an 80 megawatt heavy fuel oil diesel power plant, including a 66 kv interconnector and backup-metering equipment on a 20 year build-own-and-operate basis. The project will have a 20 year power purchase agreement with Kenya Power and Lighting Company (KPLC), the national transmission and distribution company. In 2009, KPLC invited bids for the design, financing, supply, erection, commissioning, operation, and maintenance of three new 60 to 80 megawatt medium-speed diesel electricity generating plants. The plants are to be located in the Athi River region, which is approximately 20 kilometers from Nairobi. Gulf Energy Limited won the bid to build one power station.

Environmental Categorization

The project is a category A under MIGA’s Policy on Environmental and Social Sustainability. An environmental and social review summary (ESRS) for the project was prepared by the International Finance Corporation (IFC) in 2011. The Board approved the IFC Project in October 2012, and the IFC invested in December 2013. The IFC undertook a pre-investment appraisal mission in November 2013, which confirmed that the 2011 ESRS is still valid as construction has not yet started, environmental and social conditions at the site are consistent with those presented in 2011, and the design of the project has not materially changed. Click here to view the ESRS prepared by IFC. The project is also supported by a partial risk guarantee from the World Bank’s International Development Association.

Development Impact

The World Bank’s Africa Infrastructure Country Diagnostic found that the lack of adequate, reliable electricity supply is Kenya’s largest infrastructure challenge and a key constraint to economic growth (contributing to economic losses of an estimated 2 percent of GDP). The project will help Kenya achieve a more diversified energy mix and stability to its power generation. The country remains heavily dependent on hydropower, which is frequently negatively impacted by drought. Installed thermal capacity provides a less expensive alternative to investments in emergency diesel-fired plants.

MIGA’s proposed guarantee is aligned with the agency’s strategy of supporting investments in countries eligible for lending from the International Development Association, investments in complex projects, and South-South investments.

 
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