96905 PUBLIC-PRIVATE PARTNERSHIPS BRIEFS Kenya: Olkaria III Geothermal Overview In Kenya, where only 25 percent of the population has access to electricity, the World Bank Group is supporting the government’s Least Cost Power Development Plan, which calls for an increase in the number of independent power producers (IPPs) and a more diversified energy mix. The program benefits from a combination of guarantees from the Multilateral Investment Guarantee Agency (MIGA), guarantees from the International Development Association (IDA), and financing from the International Finance Corporation (IFC). These instruments are playing an important role in increasing investor confidence and mobilizing the long-term financing needed to construct power plants. This series showcases how the World Bank Group supports the development and implementation of public-private partnerships. This support comes in the form of public sector loans, private sector finance, sector and transaction advice, guarantees, and output-based aid. PUBLIC-PRIVATE PARTNERSHIPS - MAY 2015 Background utility—the Kenya Power & Lighting Company Limited. The Kenyan government’s plan called for a series of thermal and renewable IPPs to replace the expensive, The phase three expansion was financed with a $310 diesel-fired rental power plants currently in use. million debt facility provided by the Overseas Private The first IPPs in the program will be heavy-fuel oil Investment Corporation (OPIC). plants, but subsequent IPPs will use only low-carbon resources such as geothermal and wind, and the World Bank Group Role thermal plants will transition to peak-load operation. The challenge for the government was attracting MIGA has been supporting the facility since 2000. investors and lenders to deliver the program in the The agency first provided a guarantee to Ormat absence of sovereign guarantees, which were not Holding Corporation for its equity investment possible under an agreed-on International Monetary in OrPower 4, Inc., the project sponsor in 2000. Fund program. Most recently, in 2011, MIGA issued a guarantee of $99 million to Ormat Holding Corporation of Project Description the Cayman Islands for its equity investment in phase three. The guarantee is for a period of up to Olkaria III is located in the Olkaria geothermal field 15 years and covers the risks of transfer restriction, of the Rift Valley, 90 kilometers northwest of Nairobi, expropriation, and war and civil disturbance. This and is one of a series of geothermal developments. guarantee replaced the earlier MIGA guarantee It is the only privately operated plant in the field. covering investments into the first and second Olkaria I, II, and IV are owned by Kenya Electricity phases of the project. Generating Company (KENGEN), a parastatal company owned 100 percent owned by the Government of Kenya. Outcomes The Olkaria III project involved the expansion of a The Least Cost Power Development Plan is expected base-load geothermal power plant. The plant came to move Kenya away from a historical reliance on online with 8 megawatts in 2000—becoming the first hydropower for the bulk of its power generation, privately funded and developed geothermal project in alleviating power shortages that have hampered Africa. The plant has undergone several expansions, economic growth in Kenya. The government goal is bringing the current total generation capacity of the to triple the national electricity supply of dependable complex to 110 MW with the completion of phase energy to 3,000 MW by 2018, with emphasis on the three in February 2014. Electricity generated by the development of alternative power sources—especially plant is sold under a power purchase agreement with geothermal. This project is a step in this direction. the national power transmission and distribution Photo Credits Front: Frank Van Der Vleuten/Creative Commons license, creativecommons.org/licenses/by-nd/2.0/ worldbank.org/ppp @WBG_PPP scribd.com/wbg_ppp