10 October 2013 – South Africa’s Standard Bank has signed a deal with independent power producer Aeolus Kenya, to build a US$150 million wind power plant in Kenya. Aeolus Kenya (AKL) is an independent power producer and a member of the Power Africa initiative led by the US president Barack Obama which is developing 1.0 GW of wind, geothermal and gas fired power projects in the East African region. AKL’s project, the 60.8 MW Kinangop Wind Park is its first in a strategic pipeline of projects.
Kinangop Wind Park, which will be built in the Kinangop plateau, will add to Kenya’s 1,672 MW national power grid. According to Kwame Parker, Standard Bank’s east Africa head of debt solutions and infrastructure finance, the transaction will be fully funded through a combination of debt and equity. Standard Bank is the lead arranger and will underwrite US$90 million of the debt, while Norway’s Norfund and a large Africa-focused international infrastructure investor will provide US$60 million in equity.
“With the rising demand for electricity in Kenya, this project will go a long way in providing cost-effective power to the economy. It is a good example of how to successfully bring private players into the renewable energy sector and serves as a good vote of investor confidence in the Kenyan economy,” he says.
Kenya, East Africa’s largest economy, relies heavily on hydro-electric dams for power, which is often challenged in times of reoccurring drought.
The plant is expected to come on line in mid-2015. The Kenyan government will be the main buyer of the power produced. Aeolus Kenya has already signed a power purchase agreement with state utility Kenya Power, according to Parker.
“What makes this deal significant is that it is a collaboration of players in various sectors combining their skills in order to meet Kenya’s growing demand for electricity. It’s been a complex deal, but we are delighted that all our efforts have yielded a positive outcome for Kenya and its on-going efforts to improve energy security.”
He adds that although this is the first deal that Standard Bank has concluded in the renewable energy sector in East Africa, it has opened the way for similar deals in the region as investors are increasingly looking at renewable sources to help boost power supply.
“On the back of the success of this deal, Standard Bank has signed mandates to develop other wind farms in Kenya some of which are going to be larger in size. There are also significant opportunities to finance renewable projects in the hydro and geothermal energy sectors in east Africa. There is a growing interest in renewable energy in the region and Standard Bank is positioned to play a major role in this sector” he says.
The wind project has also been registered under the United Nations’ Clean Development Mechanism.