The European Investment Bank (EIB) will provide up to EUR 43 million for development of the Kenyan electricity distribution grid. The EIB, the European Union's long-term financing institution, will lend EUR 43 million to the Government of Kenya, for on-lending to The Kenya Power & Lighting Company Ltd. (KPLC). The loan contributes to the financing of a grid development project that includes the upgrading and construction of transformer substations, the rehabilitation and extension of distribution lines and will allow connecting 320 000 new consumers. The project also includes the replacement of outdated network control and radio communication facilities.
The signing of this new lending operation is linked to the conclusion of a loan agreement with Kenya Electricity Generating Company Ltd. (KenGen) in May 2005 of up to USD 41 million. That contract concerned the part-financing of an extension of KenGen's second geothermal power generation plant in the Rift Valley at Olkaria. Both the KPLC grid development and the extension of the Olkaria II power plant are part of an overall recovery project for the energy sector led by the World Bank, in line with the policy orientations of the Government of Kenya to enhance the power sector's efficiency and long-term viability.
The loan agreement was signed today in Nairobi by The Hon David Mwiraria Minister for Finance for the Republic of Kenya on behalf of the Government and the EIB's Regional Representative Mr. Carmelo Cocuzza representing the European Investment Bank. At the signature The Hon David Mwiraria said: "the present contract is the logical consequence of the funding provided by the EIB under its loan for the Olkaria II Extension project, the contract of which I had the honour of signing with the EIB President last May, when we opened the EIB's regional representation in Nairobi. The quick conclusion of this second contract shows our closer co-operation with the EIB which has been enhanced by its local representation in East Africa".
Through increasing the volume and reliablility of electric energy supply to households and businesses in Kenya at cost effective prices and the use of an indigenous source of energy, the two projects supported by the EIB will promote socio-economic development in the country on a sustainable basis. The population in Kenya stands to benefit from improved distribution quality and wider acess to power supply as well as from the growth of economic activities fostered by the enhanced supply of electricity.
In order to help maintaining the sustainability of Kenya's external debt, the funds for KPLC's grid development will be released to the Government at a reduced interest rate resulting in a grant element of 35 %, based on subsidies made available from resources of the European Development Fund.
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.