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Financing new heavy fuel oil plant in Kenya

Petroleum Review; 16/10/2013

Standard Bank Group and the Industrial and Commercial Bank of China (ICBC) have concluded a $108mn debt financing package with Triumph Kenya for the construction of an 83-MW heavy fuel oil plant located 25 km from Nairobi. Kenya Power has signed a 20-year agreement with Triumph to purchase power from the plant, which will be a crucial supplier to the utility during times of drought when the country’s hydroelectric generating capacity becomes constrained.

The World Bank’s Multilateral Investment Guarantee Agency (MIGA) will provide $102.5mn in breach of contract insurance should Kenya Power fail to honour its 20-year power purchase agreement with Triumph. MIGA’s insurance will also cover the government of Kenya’s obligations under the ‘Government of Kenya Letter of Support’. ‘The highlight of this transaction is that it marks the first time that a Chinese commercial bank has used MIGA cover for a non-recourse transaction,’ said Kwame Parker, East Africa Head of Debt Solutions & Infrastructure Finance at CfC Stanbic Bank. ‘It’s also likely the first time a Chinese financial institution is directly lending to a project company for a transaction in Sub-Saharan Africa that is not related to resource extraction, with no explicit sovereign guarantee.’

Kenya has historically relied on hydropower for most of its electricity needs and has a current installed generating capacity of 1,672 MW, compared with peak power demand of 1,330 MW. The nation’s economy has expanded at an average rate of between 4% and 5% over the last three years

News Item details

Journal title: Petroleum Review

Countries: Africa - Kenya - East Africa -

Subjects: Oil, Hydro power