The electricity generating agency has secured a Sh38 billion loan from Japan to fund a new power plant in Olkaria. Kenya Electricity Generating Company (KenGen) says the deal with the Japan International Cooperation Agency (JICA) will fund the construction of the the Olkaria 5 Geothermal Power Plant. JICA is a Japanese government agency that coordinates official development assistance.
Olkaria 5 is expected to add 140 megawatts of power to the national grid. The drilling for the project is already underway and the company said it was only waiting for financing to start the plant.
KenGen Chief executive Officer Albert Mugo said JICA is injecting in the project 45,690 million Japanese Yen or $387.2 million (Sh38.7 billion).
The electricity generator had earlier said it would have a financing gap of Sh2 billion but the latest JICA funding seems to have covered the entire construction given that the project had been estimated to cost Sh35.3 billion.
“The loan agreement has been negotiated and will be signed between the Government of Kenya and JICA in February. The project is expected to be completed in the third quarter of 2016,” KenGen said.
Mr Mugo said tenders for the project will be issued next month and a contract awarded in July 2016.”Connection to the grid will be done by end of 2018,” he said. The new funding comes at a time when the company is pursuing various means to raise capital to fund its lined-up infrastructure projects.
The firm is understood to be working out on an equity restructuring plan as it considers venturing into asset-backed securities. It also has various ongoing capital restructuring considerations, among them conversions of Government on-lent loans to equity, whose approval has already been granted, as well as talking to various financial institutions.
It recently concluded restructuring of its short-term debts to medium-term to allow it more headroom to borrow. It has also been pushing for private investments in the geothermal sector in line with the Government’s plan to add 5000 MW to the national grid.
