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Kenya threatens to revoke licences to speed up projects

AFRICA: Kenya's government is moving to speed up private developer wind projects by issuing an edict on the licences that have already been issued to investors.

Private wind developers have now less than 24 months to bring their projects on board or risk having their licences revoked in favour of other investors. The ruling, announced in September by Patrick Nyoike, a senior civil servant in the energy ministry, has been seen as a bid to help meet the country's projected 800MW increase in electricity from wind sources by 2015.

"We have given the applicants two years to start operations, otherwise we shall withdraw the licences and give them to those who are ready to invest," says Nyoike.

Five of the wind developers targeted by the government's new directive are said to have fallen short of meeting their financial obligations, with at least one failing to start a 50MW wind project that had initially been planned for commissioning last April.

Private developers, including Aeolous Wind (160MW), Osiwo Wind (60MW), Daewoo Ngong Wind (30MW), Gitson Energy (330MW), Aperture Green Ngong (60MW), Prunus Wind Farm and Windflow, have yet to make any progress towards completing their wind plants. The government believes that some developers may be talking to unlicensed potential developers aimed at auctioning wind generation licences.

Nyoike says that the government would not approve any transfer of wind generation licences, but will instead repossess them for further issuance to other investors.

However, Gitson Energy, the developer behind the $690 million wind power project in Bubisa, in Marsabit district, insists that its project is on course. "We expect to commence generation as planned by 2013," communications director Cyrus Thairu said in September.

The company has yet to make any commitment to the country's power operator, transmission system operator or the government (Windpower Monthly, September 2010). Thairu hinted that it has reached a deal with an American wind turbine supplier, but did not disclose a name.

Only two of the developers, state-controlled Kenya Electricity Generating Company (KenGen) and Lake Turkana Wind Power (LTWP), have made tangible progress with their wind projects and, between them, expect to inject an additional 400MW into the national grid by 2015.

KenGen launched Kenya's first wind farm in September and is already feeding 5.1MW to the national grid. It plans to generate at least 100MW of electricity from wind sources over the next five years.

KenGen says it is focusing on faster delivery of wind turbines to achieve its 100MW target. The Ngong was ahead of schedule because turbine delivery time was cut from 24 months to eight months, says the firm's managing director, Eddy Njoroge.

LTWP is also closer to implementing its $625 million wind power project in Kenya's northern district of Marsabit, having received commitments that should allow it to reach financial closure for its 300MW wind farm initiative before the end of the year. The government announced in September that it would give letters of credit for $54.2 million to the company for six months, removing it from the list of developers with the threat of license repossession hanging over them.

This followed a government decision in August to secure guarantees crucial for the execution of major energy projects delayed by financial uncertainty in the recent past. This paves the way for unlocking an estimated $1.6 billion from potential private investors and international development lenders targeting the country.

A briefing by the Ministry of Energy indicates that licensed wind developers had identified the areas of Ngong Hills, Limuru, Ol Kalou, Marsabit and Kilifi as the most suitable for wind farms.

However, the ministry admits there are major challenges facing wind developers in Kenya's energy sector, particularly the crucial factor of raising financing for their projects.

"To realise the wind power potential, there is often a need for grid investments which can be both costly and time consuming. Expensive grid connection is often one of the main reasons why wind sites are not developed," the ministry says in a new report, Least Cost Power Development Plan 2010-2030.

KenGen, which generates 80% of the electricity consumed in the country, puts the cost of generating a megawatt of electricity from wind at $2.5 million, including the costs of buying wind turbines, transport, professional services and connecting to the national grid.

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