KenGen bags $76m Ethiopia geothermal deal



KenGen workers walk past the pylons of high-tension electricity power lines at the Olkaria II Geothermal power plant near Naivasha, Kenya. PHOTO | REUTERS 

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Kenya’s biggest electricity generator, KenGen, has bagged a Ksh7.6 billion ($75.9 million) contract to drill geothermal wells in Ethiopia in a joint bid with Chinese company Shandong Kerui Group.

The deal with Ethiopian Electric Power (EEP) is a boost to the Nairobi Securities Exchange-listed Kenya Electricity Generating Company’s (KenGen) revenue streams.

KenGen CEO Rebecca Miano signed the contract with her EEP counterpart Abraham Belay last weekend.

The project involves drilling as well as rig operation and maintenance of geothermal wells at Aluto, Ethiopia.

It will be implemented in two phases.

Ms Miano Monday said the deal will help to deepen KenGen’s revenue diversification strategy.

“We are delighted to announce that our diversification strategy is finally paying dividend. This is good news for KenGen, our shareholders and indeed for Kenya as a country,” she said.

KenGen is supplying about 30 per cent of the component of phase II, which translates to about $6.2 million (Ksh620 million).

“As we extend our services to Ethiopia, we are leveraging on our expertise, in depth knowledge of the African Rift Valley and close to four decades of successful drilling experience,” she added.

Geothermal stations

KenGen runs several geothermal stations in Kenya, with Olkaria I power station being the first geothermal power plant in Africa.

The first unit of the 45 megawatt (MW) plant was commissioned in June 1981, the second and third units in November 1982 and March 1985, respectively.

The deal with EEP will help Ethiopia end a 38-year wait for a commercial breakthrough in geothermal development, having started trials in 1981, according to Dr Belay.

The project is financed by the World Bank through a $76.8 million (Sh7.6 billion) loan to the Ethiopian government.

Dr Belay said that EEP’s geothermal drilling rigs are idle and broken down hence the need to purchase new ones.

“We will be delighted to have you (KenGen) build the capacity of our people to manage the equipment and run the power plants even after you exit the sites,” said Dr Belay.

KenGen has been focusing on offering expert services in electricity generation, geothermal development consulting, power plant operation and maintenance services across Africa.

KenGen, Ms Miano added, has made a decision to focus on geothermal energy production.

The firm owns a geothermal centre of excellence that conducts training programmes for local and international students seeking knowledge on green energy.

Africa’s top producer

Kenya is number one in Africa in geothermal energy production and ninth in the world, according to the Renewables Global Status 2018.

The country has a geothermal installed capacity of 685MW with an estimated potential of 10,000MW along the Rift Valley.

The country has turned focus on having more green energy in the national grid.

Geothermal is the biggest power source, accounting for 44.6 percent of electricity generation mix while hydro is second at 29.8 percent.

Thermal, which was at 24.5 percent in December 2017, now stands at just 9.6 percent, showing the shift from expensive power sources.

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