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Kenya

Gulf Power Limited

$43.7 million
Power
Summary of Proposed Guarantee
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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.