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Kenya secures KES 6.7 billion loan from Germany for geothermal power expansion

Kevin Wekesa by Kevin Wekesa
October 13, 2023
in News
Reading Time: 3 mins read

Kenya has secured a €45 million (KES 6.7 billion) loan from Germany to increase the capacity of two geothermal power plants in Olkaria, Naivasha, by an additional 40 megawatts (MW). The loan will be used to expand KenGen’s Olkaria I Additional Unit 4, 5, and Olkaria IV power plants, raising their combined capacity from 300 MW to 340 MW. The Kenyan government, holding a 70% stake in the power producer, is responsible for repaying the loan.

According to a report from the National Assembly’s Public Debt and Privatisation Committee, repayments will occur over 20 installments starting from December 15, 2027, and continuing until June 15, 2037. Additionally, there will be one final installment of €2.14 million, equivalent to KES 338.9 million based on the current exchange rate, to be paid on December 15, 2037. The loan carries an interest rate of six months Euribor plus a margin of 0.25% per annum, along with a commitment charge of 0.25% annually on undisbursed loan amounts.

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“The loan, valued at KES 6.71 billion, is intended to finance the upgrading of the geothermal power plant Olkaria I and IV. It was signed on February 28, 2023, between the Government of the Federal Republic of Germany as the lender and the Government of Kenya as the borrower,” as per the report. German Chancellor Olaf Scholz visited these power plants in May during his State visit to Kenya.

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The upgrade project involves replacing the existing turbine rotor with new blades, resulting in an additional 10 MW for each unit of Olkaria I Additional Units 4, 5, and two units of the Olkaria IV power plants, totaling an extra 40 MW. Germany’s loan is part of its contribution to assist Kenya in transitioning to fully embrace renewable energy.

Kenya currently generates over 90% of its electricity from renewable sources, with hydro, geothermal, and wind power as the primary contributors. During his visit, Mr. Scholz stated, “Kenya and Germany have entered a climate and development partnership to support Kenya in reaching 100% renewable energy and to support the country’s adaptation to climate change.”

As of now, KenGen has an installed generation capacity of 1,904 MW, with hydro at 826 MW, geothermal at 799 MW, thermal at 253 MW, and wind at 25.5 MW. It is worth noting that KenGen is among the numerous state-owned corporations with substantial debts, which were borrowed on its behalf by the Kenyan government. The state has also guaranteed significant loans procured by the company over the years.

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