Sh425bn mega dam: Second-largest project after SGR, lined up in deal with UK

William Ruto Rishi Sunak

President Willliam Ruto with the Prime Minister of the United Kingdom Rishi Sunak during The United Nations Climate Change conference COP 27, at Sharm El Sheikh Congress Centre, Egypt.

Photo credit: PCS

A Sh425 billion mega dam, likely to be Kenya’s second-largest infrastructural project after the standard gauge railway (SGR), will be among six projects to be undertaken under Kenya’s and the UK’s new strategic partnership mainly targeting the agriculture and energy sectors.

The partnership aims to boost climate finance in the country.

The Grand High Falls Dam, to be constructed in Tana River County, will irrigate about 400,000 hectares and generate 1,000MW of electricity, the two countries stated following a meeting between President William Ruto and UK Prime Minister Rishi Sunak in Sharm el-Sheikh, Egypt.

The project will be established on a public-private partnership basis, but the UK says it will take time to be completed owing to its complexity. When completed, it will be the most expensive dam ever built in the country.

“Led by UK engineering firm GBM, the project is envisaged to include both a power purchase agreement for clean energy and a water purchase agreement for agricultural irrigation,” the UK government stated.

Under the partnership that aims to fund six projects worth Sh500 billion, the two countries have also reached a leader-level agreement on a Sh11.5 billion project for green regeneration of Nairobi’s central business district, anchored around a new central rail station connected to the bus rapid transit that will incorporate latest innovations in green building technology and planning.

“The project has been developed with technical assistance from the UK government and UK architects (Atkins) won the contract to design the new station,” read a statement.

Climate-smart crop

About 20,000 farmers across counties around the Lake Victoria region will also benefit from a Sh31 billion investment in climate-smart crop and agro-industrial processing systems, in a joint venture with Kisumu County. The governments said the initiative will create up to 2,000 direct jobs.

In the energy sector, the partnership will see a doubling of the Malindi solar and battery storage with a Sh7.5 billion investment to boost the 40MW solar plant constructed by UK firm Globeleq.

A further Sh12.5 billion investment will be put into Menengai Geothermal, a 35MW geothermal project led by the Geothermal Development Company and Globeleq.

“The project has a signed and effective power purchase agreement with KPLC (Kenya Power) that confirms one of the cheapest tariffs for baseload renewable power,” the UK said.

The UK government, through the Private Infrastructure Development Group, also said it was collaborating with CPF Financial Services and other private investors to launch a new guarantee company that will de-risk investments and unlock private finance from pension funds and insurance companies for projects in Kenya.

“The UK government will commit Sh2 billion to the company, which will mobilise Sh12 billion of new climate finance for Kenyan infrastructure over the next three years,” the government said.

Much of the funding on the Sh500 billion investments will be from the private sector, with the governments offering facilitation and part of the financing, in partnership with development partners.

President Ruto on Monday said Kenya was ready for the UK’s move to fast-track the green investments.

Due diligence

An official from the UK’s High Commission in Nairobi yesterday told the Nation that all six projects have gone through approved due diligence processes to ensure that they do not turn out to be white elephants.

He said the UK’s concern was to ensure that the projects don’t load more debt on Kenya, are economically sustainable and meet standards, hence the onboarding of private investors.

“These new, clean and green investments will become flagship projects of the UK-Kenya Strategic Partnership – an ambitious five-year agreement that is unlocking mutual benefits for the UK and Kenya,” the UK High Commission in Nairobi stated.

“By fast-tracking finance into these clean, green projects with honest, reliable investment, the UK is supporting Kenya to advance and maintain its continent-leading climate credentials,” said British High Commissioner to Kenya Jane Marriott.

Under the Water Purchase Agreement, the UK wants to pioneer a new structure in Kenya under which the dam project will provide irrigation for farmland, and use the fees for irrigation to repay the private finance raised to fund the construction.

The High Commission said construction of the dam is expected to take between three and five years, with the ground expected to be broken in 2024.