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GDC expected to start drilling this week at Menengai, Kenya

Menengai Crater, Kenya (source: flickr/ meaduva, creative commons)
Alexander Richter 9 Jan 2011

Kenyan Geothermal Development Company is about to start drilling as part of its geothermal power project at Menengai, Nakuru, Kenya and expects about 120 wells to be drilled in the first phase of the project.

In news from Kenya it is reported that “Geothermal Development Company (GDC) is set to start drilling for geothermal steam in Menengai, Nakuru this week, paving way for establishment of new power plants.

According to well-placed sources within the State-owned company mandated to fast track development of geothermal resources, the process of assembling two rigs recently landed at the site has been finalised in readiness for the drilling exercise.

The firm has invited prequalification bids from investors for development of 400 megawatts (MW) of power from the underground steam.

Geothermal drilling machine. State-owned Geothermal Development Company expects to drill 120 wells in the first phase of the project for development of 400MW power from underground steam.

GDC expects to drill 120 wells in the first phase of the project that would contribute about a quarter of the country’s current installed power capacity, as east Africa’s biggest economy strives to shift production to green sources.

“The estimated 400 MW Menengai Phase 1 project, including four power plant construction is projected to be completed by 2014,” GDC said in the call for expression of interest.

The firm is to map the first four development blocks, to drill exploration, appraisal and production wells and offer the steam to competitively selected investors to construct the power plants and generate power with the fuel mined from the blocks. GDC estimates that the project field has a potential of about 1,250 MW.

The firm, however, expects successful investors to seek alternative guarantees for their investments due to what the sources said is “work already done by the Government to map blocks, drill exploration, appraisal and pledge production wells.”

According to the expression of interest notice, investors who would construct power plants and generate power with fuel from the blocks, would have to seek guarantees for investments elsewhere.

“The Government of Kenya will not provide sovereign guarantees relating to this investment and therefore the investors should seek other alternatives such as MIGA (World Bank),” stated the firm. The Multilateral Investment Guarantee Agency (MIGA) is an arm of the World Bank Group that offers political risk insurance founded to promote foreign direct investment in developing countries.

In addition to MIGA, African Trade Insurance Agency (ATI) is the continent’s only pan-African, multilateral import and export credit and political risk agency. The need for non-State guarantees follows government’s refusal late last year to offer credit guarantees to investors for projects, saying that would have exposed the country’s foreign exchange reserves to pressure and increased level of public debt.

Finance Minister Uhuru Kenyatta told private sector players seeking sovereign guarantees that there would be no more State guarantees.

He pointed out that the Government was instead dedicated to maintaining macro-economic stability and sustainable debt levels.

He, however, said given the country’s need to scale up electricity generation using renewable energy sources, an inter-ministerial committee had been set up to work with World Bank and International Finance Corporation on alternative risk-mitigation products.

ATI confirmed that it has been holding discussions with several renewable energy investors in relation to seeking credit guarantees.”

Source: The Standard (Kenya)