World Bank provides $35 million and €7 million Partial Risk Guarantees for Gulf Power Ltd
NAIROBI, March 14, 2013—Kenya’s electricity generating capacity is set to receive an 80 megawatt boost when a new private power project sponsored by local investors is completed in the next 12 months.
Gulf Power Limited, an independent power producer established by a consortium of Kenyan investors, will produce power from a thermal plant on Mombasa Road, near Athi River, Nairobi. Gulf has signed a power purchase agreement with Kenya Power and Lighting Company (KPLC) for purchase and distribution of the electricity it will generate.
Agreements for the Gulf Power project were signed today between the Government of Kenya, KPLC, the World Bank, JP Morgan Chase Bank N.A. of London and Gulf Power Ltd for two Partial Risk Guarantees (PRGs) for $35 million and €7 million. The PRGs are in support of two Letters of Credit provided by KPLC to Gulf Power Ltd, and to be issued by JP Morgan Chase Bank for a term of more than 15 years.
“The World Bank has now signed partial risk guarantees for a third private power producer to increase the availability of electricity in Kenya,” said Johannes Zutt, World Bank Country Director for Kenya. “Diversifying Kenya’s power sources and increasing the stability of supply are key to helping businesses to grow and create jobs for the Kenyan people.”
Gulf Power is being developed by a consortium of local investors, namely Gulf Energy Ltd and Noora Power Ltd. The total cost of the project is $108 million, which includes $32 million of equity investments and $76 million in long-term debt financing. The debt portion consists of IFC A Loan, and commercial lending through IFC B Loan and OPEC Fund for International Development (OFID).
“The partial risk guarantee is supporting an innovative public-private partnership program that helps African countries to unlock their energy potential and improve competitiveness,” said Lucio Monari, World Bank Sector Manager for Energy in the Africa Region. “The Bank will continue to support private sector-led investments to reduce Africa’s energy deficit.”
The Gulf Power project is the third in a series of PRGs of $166 million, which was approved by the Bank’s Board on February 28, 2012. Thika Power was the first in this series to reach financial closure in August 2012, followed by Triumph Power Generation, which reached financial close in December 2012.
“The partnership between the World Bank, Government of Kenya, KPLC, private investors, and commercial lenders has enabled successful financing of these three power projects in Kenya with minimum credit enhancement from the Bank. This has reinforced KPLC’s strong track record and additionally obviated the need for sovereign guarantee.” said Pankaj Gupta, the Manager of the World Bank’s Financial Solutions Unit, responsible for World Bank Guarantees Program.
The Kenya Government plans to increase private sector participation and utilize low carbon resources such as wind and geothermal to increase electricity generation capacity by an additional 2,000 MW in the medium term.
* The World Bank’s International Development Association (IDA), established in 1960, helps the world’s poorest countries by providing loans (called “credits”) and grants for projects and programs that boost economic growth, reduce poverty, and improve poor people’s lives. IDA is one of the largest sources of assistance for the world’s 81 poorest countries, 39 of which are in Africa. Resources from IDA bring positive change for 2.5 billion people living on less than $2 a day. Since 1960, IDA has supported development work in 108 countries. Annual commitments have increased steadily and averaged about $15 billion over the last three years, with about 50 percent of commitments going to Africa.