How graft slows down Kenya’s dream of cheap electricity

Geothermal Development Company engineers monitor activities at Menengai field in Nakuru on November 10, 2014. The GDC is now playing catch up after years of mismanagement. PHOTO | FILE | NATION MEDIA GROUP

What you need to know:

  • KenGen has managed to deliver 534MW of geothermal power and is involved in projects that will generate an additional 581MW by 2020.
  • Although two of its flagship projects, Menengai and Baringo-Silale, are on course, the latest they can deliver their full capacity of 1,065MW is 2028.

Plans to accelerate development of geothermal resources have failed to achieve the desired results, with a state parastatal established to steer the efforts set to deliver its first project late next year, over 10 years since its establishment.

Despite geothermal being described as the greatest gift from God to the energy industry, for Kenya, the desire to utilise the abundant resource to generate cheap electricity has been crippled by individuals who turned the Geothermal Development Company (GDC) to a den of looting, mismanagement and nepotism.

For GDC managing director Johnson ole Nchoe, the past two years have largely been of cleaning the mess left behind by previous top managers — most of whom were hounded out of office in 2016 and arraigned corruption-related cases — and getting the geothermal programme back on track.

“We are fast-tracking the geothermal agenda to ensure Kenyans benefit from cheap electricity,” Eng Nchoe told the Nation.

PENDING BILLS

The mess at GDC had run deep and wide, with the company having been among the top notorious state entities in failing to pay suppliers considering that in 2016, its pending bills stood at a staggering Sh6 billion.

Auditor-General reports also show that in 2015, GDC failed to pay corporate income tax amounting to Sh1.4 billion, attracting a Sh405.6 million penalty.

This is despite the fact that since its establishment in 2008, GDC has been among the well-funded state companies, receiving on average Sh7 billion from the National Treasury annually.

The company generates an extra Sh3.5 billion from steam sales per year.

Notably, about 80 per cent of funds that the company receive from Treasury constitute concessional loans from development partners, money that the country must repay with interest.

This week, Eng Nchoe told the National Assembly committee on Energy that GDC has managed to settle most of its financial obligations, reducing the pending bills to Sh1.3 billion.

POWER PRODUCTION

While the pending bills are an illustration of the level of ineptness that had engulfed the company, failure in its core mandate of accelerating geothermal development is among the factors that are forcing Kenyans to pay exorbitantly for electricity.

More than 10 years after its establishment, GDC is set to deliver its first project in late 2019.

Granted, delivering electricity from geothermal is a complex and capital intensive endeavour that involves four critical stages of proper planning and ascertaining availability of steam, painstaking infrastructure development, drilling and finally generation.

It is important to understand that geothermal energy development is all about tapping the hot fluid from deep reservoirs at a depth of 3,000 metres to 3,500 metres, and channelling it to power houses to turn steam turbines and generate electricity.

MENENGAI PROJECT

Although GDC reckons that it requires Sh200 billion to implement its projects, resources have not been a problem because development partners have been lining up to provide financing, owing to the fact that pursuit of green energy has gained traction across the globe.

For the company, internal shenanigans have been the reasons behind its failure to deliver on its mandates.

“We are on course to deliver the first 35MW of affordable electricity from the Menengai project,” Eng Nchoe added.

He added that Quantum Power East Africa, the independent power producer (IPP) implementing the project, is set to commence construction and complete the plant in a span of 17 months.

This comes after it secured Sh400 million funding from the African Development Bank.

“The firm will sell electricity to Kenya Power at $0.7 cents, meaning Kenyans will benefit from cheap electricity considering currently the market average is $18 cents,” he noted.

Ironically, during the same period, the Kenya Electricity Generating Company (KenGen) has managed to deliver 534MW of geothermal power and is involved in projects that will generate an additional 581MW by 2020.

LAWSUIT

Due to KenGen’s efforts, geothermal now contributes about 50 per cent of the country’s national power consumption.

On its part, GDC is now playing catch up after years of massive looting, mismanagement and wanton cases of nepotism that have forced Kenyans to defer the dream of cheap electricity and stunted the growth of key sectors like manufacturing.

Although two of its flagship projects, Menengai and Baringo-Silale, are on course, the latest they can deliver their full capacity of 1,065MW is 2028, a duration in which KenGen is targeting to add 2,029MW of new generation capacity from geothermal.

Another project by GDC, Suswa, which has a capacity of 700MW, is in limbo after US-based energy firm WalAm Energy Inc sued the government at the International Centre for Settlement of Investment Disputes seeking compensation for termination of its license.

The firm is seeking compensation to the tune of a Sh60 billion.

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