European Investment Bank and Agence Française de Développement agree crucial financing for Olkaria geothermal power plant extension
- Release date: 16 December 2010
- Reference: 2010-237-EN
The European Investment Bank and the French Development Agency, Agence Française de Développement (AFD), have agreed to co-finance the expansion of the electricity generating capacity of the Olkaria geothermal power plant by 280 MW.
The agreements will be signed in Nairobi on December 15th by the French Ambassador, his Excellency Mr Etienne de Poncins, the Director of AFD in Kenya, Mr Yves Terracol, the Head of the European Investment Bank’s East & Central Africa Regional Representation, Kurt Simonsen, and the Deputy Prime Minister and Minister of Finance of the Republic of Kenya Mr Uhuru Kenyatta. Energy Permanent Secretary Mr Patrick Nyoike will also attend, as well as the CEO of KenGen Mr Eddy Njoroge, the CEO of Geothermal Development Company (GDC) Mr Silas Simuyu and the Head of German financing agency KfW, Mr Piet Kleffmann. The three European financing institutions cooperate closely on the project under the Mutual Reliance scheme, part of an international effort to increase aid effectiveness through better co-ordination and harmonisation of development assistance.
This significant increase in geothermal generation capacity in Kenya will be undertaken by KenGen, the existing operator and will contribute to improving the country economic efficiency and the fight against climate change. Both AFD, the lead European financier for this project, and the European Investment Bank are financing the Olkaria I and IV generation plants. AFD will be providing a loan for EUR 150 million with an additional interest rate subsidy equivalent to approximately EUR 34 million. The European Investment Bank will lend EUR 119 million with an additional interest rate subsidy equivalent to approximately EUR 29 million. This subsidy element will be specifically targeted at assisting the Government of Kenya’s plans to combat climate change by further developing the country’s geothermal potential. The total cost of the project is estimated at EUR 1007 million, which in addition to the above financing will be co-financed by the Government of Kenya, KfW, JICA, the World Bank and KenGen.
“The European Investment Bank is committed to strongly supporting in Kenya’s energy sector, improving efficiency and quality of supply in electricity distribution, and increased electricity generation using non-weather dependent and non-fossil fuel geothermal power. Extension of the Olkaria geothermal plant reinforces Kenya’s position as a leading example of geothermal power generation and is an important diversification in Kenya’s electricity generation. The operation is part of the European Investment Bank’s climate action activities around the world.“ highlighted Plutarchos Sakellaris, European Investment Bank Vice President for Africa.
The formal financing agreements are signed with the Government of Kenya with loans on-lent to KenGen. The interest rate subsidy grant of the EuropeanInvestment Bank loan directly benefits the Geothermal Development Company (GDC) specifically established to develop geothermal resources in Kenya and encourage private sector participation in geothermal technology.
The European Investment Bank has a long-standing involvement in geothermal development in Kenya, and has co-financed the Olkaria power stations since the 1980s. Agence Française de Développement total financial commitments in the green energy sector will reach this year 236 million EUR, more than 26 billion KES, through KenGen, GDC and local banks to promote energy efficiency and renewable energies within the private sector.