On September 22, 2011, MIGA issued a guarantee of $99 million to Ormat Holding Corporation of the Cayman Islands for its equity investment in OrPower 4, Inc. in Kenya. The guarantee is for a period of up to 15 years and covers the risks of transfer restriction, expropriation, and war and civil disturbance. This guarantee replaces an earlier MIGA guarantee that covered investments into the first and second phases of the project. The new guarantee also covers an additional equity investment of $110 million for phase three of the project.
The project involves the expansion of a base-load geothermal power plant in the Olkaria geothermal fields of the Rift Valley, 90 kilometers northwest of Nairobi. The expansion will provide additional capacity of 36 megawatts. The new plant is scheduled to come online in 2013 and will result in a combined generation capacity of 84 megawatts. Electricity generated by the plant is sold under a power purchase agreement with the national power transmission and distribution utility—the Kenya Power & Lighting Company Limited.
The project is helping alleviate the severe power shortages that have hampered economic growth in Kenya. The World Bank Group’s Country Partnership Strategy notes that investment in electricity is a key element of unlocking Kenya’s growth potential. It also commits to strengthening the Bank Group’s support for government efforts to diversify electricity generation away from hydroelectricity to other green sources such as geothermal. The government’s recently announced National Electricity Supply Master Plan has ambitious plans to identify new generation and supply sources with the goal of tripling the national electricity supply of dependable energy to 3,000 megawatts by 2018 (and improving access from 29 percent to 40 percent by 2020), with emphasis on the development of alternative power sources—especially geothermal.
This project is also aligned with MIGA’s strategic priorities of supporting investments in complex infrastructure projects as well as investments into countries eligible for assistance from the International Development Association.