Addis Ababa, Ethiopia — ESI-AFRICA.COM — 23 January 2012 – Details of the high-stakes negotiations before Kenya signed a 400 megawatt (MW) power deal with Ethiopia are emerging, revealing that Nairobi managed to talk down the initial charges proposed by Addis Ababa as too high.

The deal, which analysts say pre-sages a new era of power trading in the region, was arrived at after a great deal of haggling, with the Ethiopians pressing for a higher price on the grounds that Kenya is currently buying even more expensive power from thermal plants. “The East African” reports that it ushers in one of the biggest power pool projects in the region, and will serve as a model for future arrangements under the Eastern Africa Power Pool.

The transaction is a take or pay contract, meaning that Kenya has to pay for the 400MW supply even if it is not using it. It will pay US cents 7 per kilowatt hour. The transmission line is expected to be completed by 2016 at a total cost of US$1.2 billion.

The agreement for continuous supply of 400MW was concluded in Addis Ababa by Kenya Power and the Ethiopian Electric Power Corporation after two days of intense negotiations.

The power purchase agreement is the second in Kenya’s history as it seeks long-term solutions to its perennial power problems. A decade ago, Kenya imported about 30MW from Uganda.

The conclusion of the agreement paves the way for Kenya and Ethiopia to mobilise funds for building a 1,045km high-voltage electricity transmission line. Ethiopia, which is endowed with a huge hydropower potential of about 45,000MW, is currently building three dams to generate power for domestic use and to export to Kenya and other neighbouring countries.