Three steam power plants set to be built after Geothermal strikes Sh115m deal

Workers at a geothermal well at Menengai Crater in Rift Valley. PHOTO | FILE

The construction of three three steam power plants at the Menengai fields are set to start following a a Sh114.9 million deal between the Geothermal Development Company (GDC) and the forests regulator.

Kenya Forest Service (KFS) has been paid the Sh114.9 million, backdated to 2014, because it owns the Menengai geothermal site where GDC is drilling steam wells and has already contracted three companies to build power plants.

The building of the three power plants under a build–own–operate (BOT) model — each with a capacity of 35 megawatts — has suffered multiple delays attributed to land acquisition headwinds.

“We have now concluded the lease agreement and paid. We are now issuing sub-leases to the power producers,” said Johnson Ole Nchoe, chief executive at GDC.

New York Stock Exchange-listed Ormat Technologies, Quantum Power, and local firm Sosian Energy are the independent power producers picked in 2014 to build the generating plants.

Construction of the electricity plants is now rescheduled to start in February 2017 and is expected to take about 18 months.

Land leases

GDC has already signed a deal with the three firms to supply them with steam at a cost of ¢3.5 (Sh3.05) per kilowatt hour.

“They could not close funding without the land leases,” Mr Nchoe said in an interview.

The State-owned steam developer has leased 4,591 hectares (11,492 acres) from the forest agency, and will pay “a conservation fee” of Sh10,000 per acre per year as provided for in the Forest Act.

Mr Nchoe said the power firms will pay sub-lease only for the land where they will construct their plants, with the largest piece being four acres, translating into Sh40,000 fee per year. GDC began drilling at Menengai in February 2011 and has so far sank 34 wells with a confirmed output of 137MW.

The managing director said the firm had settled pending payments totalling Sh500 million owed to engineering firm H Young, which is constructing the steam-gathering system.

GDC has in the recent past been steaming with headwinds such as tendering irregularities and fraud, which has slowed down projects and scared away multilateral financiers.