On June 27, 2013, MIGA issued guarantees of $102.5 million to Industrial and Commercial Bank of China and Standard Bank of South Africa covering their-non shareholder loans to Triumph Power Generating Company Limited in Kenya. MIGA also issued a guarantee of $11.1 million to CfC Stanbic Bank, a subsidiary of Standard Bank of South Africa, covering its swap arrangement with Triumph to hedge against long-term interest rate risk. The coverage to all guarantee holders is for a period of up to 12 years against the risk of breach of contract.
The project consists of the construction of an 83 megawatt heavy fuel oil plant on a build, own, and operate basis. The plant will be located at Kitengela, near the Athi River, approximately 25 kilometers from Nairobi. Triumph will enter into a 20-year power purchase agreement with Kenya Power and Lighting Company.
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.
The project is further supported by a partial risk guarantee from the World Bank’s International Development Association that backstops a letter of credit from JP Morgan Bank of London.
MIGA’s guarantees are 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.