HomeRegional NewsEast AfricaLack of funding for energy projects may impede future plans

Lack of funding for energy projects may impede future plans

Technicians strive to
keep Kenya’s electricity
in working order “’ new
projects are needed,
but funding is proving
Nairobi, Kenya — ESI-AFRICA.COM — 14 October 2011 – Government and energy-related parastatal representatives say they are frustrated by the slow financial closure of projects meant to provide electricity in Kenya “’ a challenge that may impede the realisation of future goals.

This situation has emerged in the wake of last week’s National Energy Conference here, where it became clear that securing funding for projects was a serious challenge. Between now and 2030 the energy sector was looking for about US$57 billion to finance various projects.

On one hand, closing financing deals for various projects is taking too long to achieve, said the speakers, while on the other financiers were reluctant to take risks in the absence of sovereign guarantees. With a weak balance of payment, Treasury might not be in a position to issue such guarantees.

The resultant delays in funding have prolonged the country’s reliance on expensive thermal generation that depends on imported oil. The new projects include wind power, geothermal, and a number of plants supported by independent power producers.

From the World Bank’s perspective, the country has fulfilled most of the requirements needed for energy project financing.

President Kibaki has directed both Treasury and the Energy Ministry to come up with modalities to raise funds locally from institutions such as pension funds to finance key projects. He also urged local banks to form a consortium that would provide funding for rebuilding the ageing Mombasa-Nairobi petroleum pipeline.

The general feeling now is that if funding from western financiers proves difficult to conclude, mainly because of lengthy processes and insistence on sovereign guarantees, Kenya should pursue the eastern-window provided by emerging partners such as China and Japan.