Kenya looks to private sector to boost electricity provision

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A national drive to provide 100% of Kenya’s population with electricity by 2020 and reduce load losses is gaining momentum, steered by a multi-billion-dollar project pipeline.

Supplying hard-to-reach rural areas that are currently off-grid forms a key part of the government’s efforts, and has opened doors to private investors and developers as Kenya’s state-owned utilities look to tap funding for projects.

Their efforts are expected to receive a boost in the early part of 2017 with the launch of a framework for public-private partnerships (PPPs), which will play a pivotal part in plugging funding gaps.

Targeting remote locations

Key to Kenya’s plans is a bid to double the number of customers connected to the country’s high-voltage transmission grid to 9m by 2018.

The KSh362bn ($3.5bn) initiative, which is being coordinated by the state-owned utility Kenya Electricity Transmission Company (Ketraco), includes installing 8300 km of new lines, which will extend the grid’s reach to 80% of the population.

Dovetailing with this effort is the Last Mile Connectivity Project (LMCP), a separate, phased initiative launched in April, which specifically targets the supply of electricity to inhabitants of rural areas through more effective use of existing distribution transformers.

Households within a 600-metre radius of more than 5000 of the country’s transformers will receive electricity under the initiative, which includes the construction of 12,000 km of low-voltage distribution lines and is expected to be completed within 18 months.

The first phase of the LMCP, valued at KSh1.46bn ($150m), is being financed by the African Development Bank and carried out by the authorities in partnership with 11 contractors. Further funds for the project will be made available from the French Development Agency and the EU in the form of loans and grants.

Commenting ahead of the project’s launch, Ben Chumo, the CEO of Kenya Power – which owns and operates the majority of the country’s transmission and distribution system – acknowledged that the authorities had dragged their feet on extending electricity provision, especially in rural areas, because of the high cost of connectivity.

“But this is now going to change, and we [are] projected to have universal connectivity by, or before, 2020,” he told local media.

Bridging the funding gaps

The project pipeline is producing myriad openings for the private sector, with Ketraco keen to secure funding for several developments.

In September the utility said it was looking to attract close to $6bn from private investors for the construction of 18,300 km of high-voltage power lines, according to local media reports.

Boosting the role played by the private sector in electricity development to meet funding shortfalls against a backdrop of budgetary constraints is a key issue for the government.

Speaking at a conference on the topic in September, Joseph Njoroge, the principal secretary for the Ministry of Energy and Petroleum, announced that guidelines on PPPs should be in place by the first quarter of 2017.

“We have doubled the number of [electricity] connections in the past three years, which means we also need to escalate and fast-track investments in transmission so we can create a vibrant and robust power system,” he told conference participants.

Also speaking at the conference, Fernandes Barasa, Ketraco’s managing director, put the financing gap at about $5.9bn, noting that an estimated $6.5bn would be required to implement the country’s transmission projects.

An eye on exports

Alongside efforts to secure domestic last-mile connectivity, Kenya is moving to boost international connections via its transmission grid.

In October Ketraco contracted North China Power Engineering to build a 96-km, 2000-MW power transmission line that will connect to Tanzania’s national grid. The KSh2.6bn ($25.5m) project will also enable the Kenyan electricity grid to link up with the Southern African Power Pool, facilitating added opportunities for energy trading. The bloc currently comprises Mozambique, South Africa, Tanzania, Zambia and Zimbabwe. 

The expansion of the high-voltage grid could have positive broader implications for both Kenya and the region, facilitating the trading of electricity and improving regional energy security.

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