KenGen set to top the world in geothermal energy generation

Written by
  • 4 years ago
  • Posted: December 17, 2015 at 1:02 pm

The Kenya Electricity Generating Company (KenGen) is set to embark on an ambitious growth strategy that will see it move to the top of the world in geothermal energy generation in the next five years after shareholders approved its capital restructuring plans.

The power generator will now seek clearance from the Capital Markets Authority (CMA) and the Nairobi Securities Exchange (NSE) after getting the go-ahead for a planned Rights Issue during its 63rd Annual General Meeting (AGM).

KenGen has lined up a number of capital projects aimed at aggressively growing its generation capacity, mainly from the renewable geothermal sources, to be partly funded with the proceeds from the Rights Issue expected early next year.

KenGen Chairman, Mr. Joshua Choge, said the company is targeting the installation of an additional 766 Megawatts (MW) by the year 2020, 676MW of which will come from geothermal sources. KenGen has in the last year commissioned 268MW; 248MW from geothermal and 20.4MW from wind, boosting its total installed capacity to 1,611MW as at June 2015.  KenGen currently accounts for 70% of the national installed capacity.

Mr. Choge told shareholders the company would enhance investment in geothermal projects by employing innovative technologies. Geothermal energy is significantly a cheaper and environmentally cleaner source of electricity. Kenya has broken new ground in energy generation leading to reliable and competitively priced electricity through the use of the pioneering wellhead technology, a KenGen innovation.

The technology, which has been in use for the last three years, has enabled the Company to produce over 60MW of additional geothermal power. Output from the wellhead technology is expected to rise to 80MW in the first quarter of the year 2016, with plans to scale up the mobile wellhead power plants to 350MW by year 2025.

“The success of this innovative technology underscores the importance of continuing our strategy of leveraging on innovation and continuous improvement. This is how we can compete more effectively on the global stage as we continue to create value for shareholders,” he said.

Mr. Choge at the same time disclosed that the company had begun the process of setting up an Industrial Park at the geothermal fields in Olkaria to host energy intensive industries, bringing the power load centre close to the source. The park is one of the means of proactively narrowing the existing supply demand gap as the industries will be located at close proximity to the power plants, thereby utilizing energy cost effectively. It will also help catalyze the growth of industries in and around Olkaria.

The Managing Director and CEO, Eng. Albert Mugo said KenGen had already delivered 375MW out of the 844MW contribution to the Government’s plan to add 5,000+MW to the national grid.

Of these, Geothermal accounts for the largest share with 330.6MW, 24MW of hydro and wind 20.4MW

Eng. Mugo said the Company will require an estimated Kshs160 Billion to deliver the remaining 469MW.

Part of the funds will be realized from proceeds from the planned rights issue, he said. “We are financially restructuring our balance sheet to create room for more debt as well as pursue off-balance sheet financing to meet this capital need.” The CEO said financing is required for several other plants including: Olkaria 1 Unit 6 – 70MW, and ongoing upgrade of Olkaria 1 to 50.7MW by 2017.

Development financiers have committed to fund the 140MW Olkaria V and Meru Wind phase 1 80MW expected to come on stream in 2018. Eng. Mugo disclosed that the 140MW at Olkaria VI will be funded through the public private partnership financing model.

“The country’s demand for power by year 2020 is expected to cross the 3,000 MW mark. We do not want to miss future growth opportunities simply because the capital required now seems unaffordable,” he told shareholders.

The commissioning of Olkaria 280MW recently has propelled Kenya to the eighth position in geothermal power production in the world and the top position in Africa.

“Over the next few years, we expect geothermal to expand and to be the sole driver of profitability, whereas the company’s diesel and hydro operations – like other utilities around the world – are operated as low-growth businesses producing stable cash flows, which can offer a good foundation for regular dividends,” said analysts at Renaissance Capital in a Research Note.

The AGM approved a final dividend of Kshs0.65 per share to be paid out to shareholders in February next year. Geothermal energy is currently the dominant source of electricity accounting for about 50% of the national energy consumption requirements.

 

What is your opinion on the topic?
Erick Vateta
Tech Editor at Kachwanya.com
---
Erick Vateta is a lawyer by training, poet, script and creative writer by talent, a model, and tech enthusiast. He covers International tech trends, data security and cyber attacks.
Erick Vateta on FacebookErick Vateta on Twitter
Article Categories:
BUSINESS