The European Investment Bank is to provide support for the extension of the Olkaria II geothermal power plant from resources of the Investment Facility. EIB President Philippe Maystadt and the Managing Director of KenGen, Mr. Edward Njoroge, signed a financing agreement today in Nairobi under which the EIB will lend EUR 32.5 million to Kenya Electricity Generating Company Ltd. (KenGen).
The extension of the Olkaria II power generation plant, located in the Rift Valley near Naivasha, consists of the drilling of additional wells, together with the extension of the existing substation and switchyard, and the installation of a 35 MW steam turbine in addition to the existing 70 MW generation capacity. The Bank has already supported the construction of the first geothermal power plant in the 1980s as well as the Olkaria II plant, commissioned in 2003.
The Olkaria II extension project has become possible because of the availability of greater underground steam resources than initially expected. It is part of Kenya's Energy Sector Recovery Project, a comprehensive recovery programme for enhancing the power sector's efficiency and long-term viability, designed with support from the World Bank.
The loan facility for the Olkaria II extension project will be made available directly to KenGen alongside a contribution from the World Bank (IDA) who will be lending via the Government of Kenya. Direct lending from EIB to KenGen through the Investement Facility reflects KenGen's financial autonomy and is expected to encourage other financiers to build up direct relations with the company for funding further large investment projects needed to meet the country's future growth in electricity demand.
The EIB, established in 1958 by the Treaty of Rome, finances capital investment projects that further the European Union (EU) policy objectives. It also participates in the implementation of the EU's co-operation policy towards third countries that have co-operation or association agreements with the Union.
Financing in Africa, the Caribbean and the Pacific (ACP) is carried out under the provisions of the Investment Facility, set up by the ACP-EU Partnership Agreement, signed in Cotonou in June 2000. Under the Cotonou agreement the total financial aid available amounts to + EUR 15 billion for 2002-2006, of which EUR 11.3 billion is grant aid from the EU member states, + EUR 2 billion is managed by the EIB under the Investment Facility and up to EUR 1.7 billion is in the form of loans from the EIB's own resources. The Investment Facility is a revolving facility (loan amortizations will be invested in new operations), aiming at supporting technically, environmentally, financially and economically sound projects in the private or the commercially run public sector.