Longonot project in Kenya plans drilling start for April 2014

Longonot project in Kenya plans drilling start for April 2014 View at Longonot, Kenya (source: flickr/ Kalense Kid, creative commons)
Alexander Richter 26 Nov 2013

The privately owned Mt Longonot geothermal project in Kenya plans to start drilling in April 2014. The project is estimated at 140 MW power generation capacity potential and an investment volume of around $600 million.

African Geothermal International Limited (Agil) is the developer of the Longonot geothermal project near Olkaria, Naivasha in Kenya. The project has an estimated investment volume of around $600 million.

The planned 140 MW project wants to launch the project with drilling of initial exploration wells in April 2014. The project


Agil is owned by local and foreign shareholders and plans to derive around 75 percent of the overall financing from debt financing, with the remainder through equity.

The company has already secured $10 million in equity for the exploration phase, with additional $8.4 million to be secured through an agreement between Agil and the African Union Commission, likely through the Geothermal Risk Mitigation Fund. The rest of the financing is planned to be raised after the initial four wells have been drilled throughout 2014. Possible funding sources are development banks and insurance companies.

Some of the money is expected to come from development financial institutions, insurance companies and possible pension funds.

As for financing, the developers describe debt as a better option for the financing as it only carries an interest rate of 7 to 8 percent, while equity investors require a return of at least 15 percent.

Mr Hassan said the bias for using more debt is because it is considered cheaper at a rate of 7-8 per cent, but equity requires a return to investors of not less than 15 per cent.

The company received the license for the project in 2009, when it was given a concession of 132 square kilometres around Mount Longonot for exploration and power production for 30 years.

There is a strong investor interest, so the developer, who expects to not look into raising until the first four wells have been drilled. The interested financing partners include among others strategic investors such as utilities in Japan and China.

There currently are only a few selected private sector geothermal developers and producers. KenGen and Geothermal Development Company are majority state owned.

The potential for the site might as well be more than the estimated and now planned 140 MW.

Agil is planning to start drilling in April 2014 with one rig. Additional wells are then expected to be drilled in 2015 with an additional rig and up to 10 to 30 wells drilled in a year.

Source: Business Daily Africa