Kenya invites equity bids of up to $800 million for Menengai II development

Alexander Richter 1 Jun 2012

Geothermal Development Corp. is seeking bids for equity investments to finance up to $800 million worth of geothermal power development of the Menengai II project.

News from Kenya report that Germal Development Corporation (GDC) has invited equity investors to fund the development of 800 megawatts of steam at a cost of $800 million (Sh68 billion).

“The state-owned firm is seeking a joint venture with four equity firms to fund the Menengai II project in which 120 wells will be drilled and their steam sold to power generators such as Kenya Electricity Generating Company (KenGen).

Under the deal, GDC will provide between 20 per cent and 40 per cent of the capital, with the investors contributing the rest. Each investor will, however, be required to raise at least Sh17 billion ($200 million) to be shortlisted.

“GDC intends to engage four equity investors who will each get the opportunity to jointly develop 200 megawatts of steam with GDC at its Menengai Phase II scheme,” the company said in a statement.

The parastatal has undertaken to bear the risk of failed wells and will also incur the cost of developing infrastructure like roads, besides acquiring all land rights.

The government will, however, not offer the investors sovereign guarantees, leaving them to seek private insurance or guarantees from the World Bank’s Multilateral Investment Guarantee Agency.

The corporation said it would shortlist bidders by year-end and pick the four winners by July 2013 and they will be expected to provide the funds within six months. The project would be commissioned between 2017 and 2021.

The government is betting on expanding geothermal power generation to diversify energy sources, creating opportunities for big-ticket investors in the energy sector.

Investors are set to gain from the government’s move to develop electricity generation from the cheap and clean sources.”

Source: Business Daily Africa