AfDB quits power plant over Gideon Moi stake

Economy

AfDB quits power plant over Gideon Moi stake


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Baringo Senator Gideon Moi. FILE PHOTO | NMG

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Summary

  • The funding hitch emerged after revelations that Mr Moi had bought back a majority stake in Sosian from steel and cement tycoon Narendra Raval.
  • Mr Raval, popular by his nickname Guru, sold back the firm to Mr Moi after incessant delays in building the power plants, which are yet to be completed nearly eight years after they won the contract.
  • The company is one of three independent power producers (IPPs) developing the 105MW Menengai geothermal project.

The African Development Bank (AfDB) has withdrawn multi-billion shilling funding for a 35-megawatt geothermal power plant in Menengai, Nakuru over Baringo Senator Gideon Moi’s ownership.

Two sources familiar with the matter indicated that AfDB has demanded change of ownership before it can offer funding to Sosian Menengai Geothermal Power, one of the three firms that State-owned Geothermal Development awarded exclusive rights to set up a steam plant under a build-own-operate model.

The funding hitch emerged after revelations that Mr Moi had bought back a majority stake in Sosian from steel and cement tycoon Narendra Raval.

Mr Raval, popular by his nickname Guru, sold back the firm to Mr Moi after incessant delays in building the power plants, which are yet to be completed nearly eight years after they won the contract.

“The bank is currently engaged on the Quantum Power East Africa (QPEA) project only. It has previously been engaged on the Sosian project as well but it requires a change in shareholding before it can engage further,” said one of the sources who requested not to be identified given the sensitivity of the matter.

“The delays have primarily been due to negotiation of the finance documents between the lenders and sponsor, closure of certain bankability issues with the government agencies and change in the sponsor of the project.”

He directed the Business Daily to change in ownership at QPEA in reference to AfDB funding. The source signalled that AfDB pushed for ownership changes in QPEA, which triggered British firm Globeleq to acquire a majority stake in the firm in February last year.

The company is one of three independent power producers (IPPs) developing the 105MW Menengai geothermal project.

The withdrawal of AfDB is a blow to the government, which is looking to geothermal to power cheaper fuel development.

With a proven potential of 7,000 megawatts, geothermal energy from Kenya’s geologically active Great Rift Valley forms the cornerstone of a government scheme to boost energy production.

It remains unclear why AfDB is not keen to partner with the wealthy Moi family.

The family is arguably one of the richest in Kenya, with a net worth estimated at tens of billions of shillings.

This is wealth accumulated before, during and after the former President’s 24-year rule (1978- 2002), with his children expanding the family business empire further.

Kenya’s second President remained powerful years after he left State House, with his businesses playing a major role in the economy.

According to official and non-official records, the family’s business empire spans real estate, transport, education, hotels, banking, aviation, manufacturing, media, agri-business, security and construction.

Sosian is closely associated with Senator Moi, with his son Kigen Moi and Anastacia Kioko Mululu listed as directors.

Ms Mululu is a former partner at Mutula Kilonzo and Co Advocates, which provided legal services to former President Moi for many years.

Kenya is banking on clean and cheaper sources such as geothermal and wind to lower the cost of electricity from the current average of Sh20 per unit for domestic households.

Mr Raval’s purchase of the Sosian stake in 2017 was aimed at pacifying AfDB and underlined the lucrative nature of Kenya’s energy sector, which continues to attract deep-pocketed investors.

International financiers

Kenya offers investors a choice of either local- or foreign currency-denominated feed-in-tariffs, with the latter being favoured by international financiers.

Furthermore, Kenya’s energy regulations stipulate that Kenya Power, the sole electricity retailer, must sign 20-year power purchase agreements (PPA) with power producers, offering comfort to private investors to recoup their investments.

Mr Raval earlier said the investment in the geothermal power plant would top Sh8.2 billion and slated its groundbreaking in March 2017.

To date, construction of the plant is behind schedule and it is unknown when it will inject electricity to the grid.

Sources familiar with the Moi deal say delays prompted Mr Raval, whose first business was a hardware shop he started in 1990 in Nairobi’s Gikomba market, to exit Sosian.

New York Stock Exchange-listed Ormat Technologies and Quantum Power are the two other firms selected to build a 35MW steam power plant each on a public-private partnership basis.

The three firms were picked in mid-2014, but substantial works on the power plants are yet to kick off.

The IPPs at the Menengai Geothermal Project disclosed they were yet to secure financing for the ventures.

“The three independent power producers to construct 105 megawatt (MW) power plants are yet to attain financial closure with their lenders,” the Treasury told Parliament in earlier disclosures.

The three firms had been selected in 2013 through competitive bidding to build, operate and own the first three power plants in Menengai, each generating 35MW.

GDC has already constructed the steam gathering system while the Kenya Electricity Transmission Company (Ketraco) set up a 132 kilovolt (kV) substation that will transmit electricity from the three power plants.

Under the arrangement — christened Menengai Model — GDC was to take care of upfront risks and then invite private sector players to construct, own and operate the plants for 25 years.

Mr Raval, who has interests in steelmaking, cement manufacturing, roofing materials and aviation, was betting on Sosian to enter Kenya’s power sector.

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