Forest deal to help move forward Menengai geothermal development

Menengai Crater, Kenya (source: flickr/ meaduva, creative commons)
Alexander Richter 28 Nov 2016

GDC settled a deal with Kenya Forest Service over Menengai land-leases that will resolve one of the obstacles for the development of three private geothermal power plant projects in Kenya.

The delay in the development of three private geothermal power projects in Menengai, Kenya has partly been blamed on land acquisition issues, as reported by the Daily Nation.

Through a deal with Kenya Forest Service (KFS) that has GDC pay Sh114.9 million ($1.1 million) backdated to 2014, an agreement on a land lease has been concluded and sub-leases can be issued to power producers.

GDC has been drilling its wells on the land of KFS and with the deal under wrap, the construction of three power plants by private developers to be built under an build-own-operate (BOT) model can begin. The plants will have a power generation capacity of 35 MW each. The companies to build the plants are Ormat Technologies, Quantum Power and local firm Sosian Energy and were chosen in a 2014 bid.  Construction of the plants is now rescheduled to start in February 2017 and is expected to take 18 months. The agreed on price for the steam is at $0.035/ kWh.

In the interview with the Daily Nation, Johnson Ole Nchoe, chief executive at GDC, said that the companies could now close funding, which they previously weren’t able to without the necessary land leases.

State-owned GDC has 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 137 MW.

GDC further has settled pending payments totalling Sh500 million ($4.8 million) owed to engineering firm H Young, which is constructing the steam-gathering system for the development of the geothermal power plants in Menengai.

Source: Daily Nation