HomeRegional NewsEast AfricaFuel importer looks to build 80 MW plant in Kenya

Fuel importer looks to build 80 MW plant in Kenya

30 May 2012 – Bloomberg reports that Gulf Energy, a Kenyan petrol station operator and fuel importer, plans to build an 80 MW power plant fed by heavy fuel oil. This is to provide additional generation capacity as electricity use grows at about 14% a year in east Africa’s largest economy.

The power station located at Athi River, 25 kilometres southeast of Nairobi, is due to be completed by July 2013. Abubakar Ali, chief financial officer of Gulf Power, a subsidiary of Gulf Energy, says that Gulf Energy entered a 20 year power purchase agreement last year with Kenya Power Ltd. (KPLL), the country’s sole electricity distributor.

Demand for power in Kenya is expected to reach 16,905 MW by 2031 from 1,520 MW in 2012, the country’s energy regulatory commission says. Gulf Energy was the biggest private importer of fuel products by volume in 2010 and 2011 in Kenya, which has no oil or gas reserves of its own in commercial production.

The company also operates in Uganda and Rwanda, and plans to expand into Tanzania this year followed by Zambia and the east of Democratic Republic of Congo.

About three-quarters of the €80 million project will be debt-financed. The International Finance Corporation, a unit of the World Bank, the OPEC Fund for International Development and Standard Bank Group are each lending €20 million. Gulf Energy will raise the same in equity with a partner.

The World Bank is providing a partial risk guarantee in support of the project. The site will be developed on a build-own-operate contract for 20 years, according to the IFC. Gulf Power also plans to open its newly built US$12 million storage facility with capacity to hold three million liters of petroleum products and 450 tonnes of gas stocks in Nairobi in the second-half of this year.

Gulf Energy is in talks with IFC on plans to sell liquefied petroleum gas in units of as low as 200 grams, making it easier to offer to low earners. “We have a lot people using charcoal and kerosene because they can’t afford the equipment and to buy gas in 6.0 kg and 13 kg canisters,” Ali says. “This would be affordable.”