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Kenya

Gulf Power Limited

$27.9 million
Power
Project Brief
Active

Project Facts

Project Facts

Project Facts

Kenya
Project ID
10646
Strategic Priority Area
Complex Project
IDA
South-South
Guarantee Holder
Standard Bank
Investor Country
South Africa
Environmental Category
A
Date SPG Disclosed
February 27, 2014
Projected Board Date
April 29, 2014
Project Type
Non-SIP
Fiscal Year
2014

Project Description

On June 16, 2014, MIGA issued a guarantee of €20.6 million ($27.9 million equivalent) covering a non-shareholder loan from Standard Bank of South Africa to Gulf Power Limited in Kenya. MIGA’s coverage is 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-kilovolt 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, approximately 20 kilometers from Nairobi. Gulf Energy Limited won the bid to build one power station.

The International Finance Corporation is providing financing for Gulf Power Limited and the project is further supported by a partial risk guarantee from the International Development Association.

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 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.