Kenyan Banks Lose Opportunity to Finance the Lamu Coal Plant Project

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Kenyan banks have lost the opportunity to finance the $2 billion Lamu coal plant project because they lack the depth and tenor to fund large projects over an extended period.

Amu Power chief executive Francis Njogu said: “The local market does not have the depth in terms of quantum and the tenor. We need 15-year money or more. The local commercial banks would struggle to do 15-year money.”

The Central Bank of Kenya (CBK) limits the amount banks can lend to a single individual/project on the basis of their capital ability. However, the Energy Regulatory Commission (ERC) of Kenya could begin denominating tariffs for energy projects in Kenyan shillings to boost project funding by local banks.

Amu Power Company, the consortium that won the bid to build the coal plant, said the project will be funded through debt in three quarters plus the shareholders’ equity of $500 million. In each quarter, the company will get $1.5 billion.

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Amu Power got $1.2 billion from the Industrial Commercial Bank of China in February 2015. The company is expected to receive a partial risk guarantee for the plant from the African Development Bank (AfDB).

“We will be looking at environmental and human concerns surrounding the project before we make our commitment to it,” said Gabriel Negatu, AfDB regional director-general.

The Coal Plant Project

The Lamu coal plant is part of the Lamu Port South Sudan-Ethiopia Transport (Lapsset) corridor. The plant, which will supply 1,050MW which us the same as 44 per cent of the country’s installed capacity of 2,400MW.

Electricity from the plant will be priced at 7.52 US cents per unit, which is nearly a third of the average price charged by diesel-fired plants.

The construction of the Lamu coal plant has been delayed since 2015.

Source: Kenyawallstreet

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