Landmark public-private electricity infrastructure deal struck by Kenya

The Kenya Electricity Transmission Company Limited (Ketraco) has signed a deal with an Indian electric power transmission company to finance, design, construct, operate and maintain electricity infrastructure projects in the East African country. 

The deal, closed on Friday, is a rare foray into public-private partnership funded power projects for Kenya.

Details of the deal are contained in Ketraco’s Statement on the Growth of Power Transmission Infrastructure and the Public-Private-Partnership Financing Option document.

The agreement with Adani Energy Solutions Limited (AESL), the power subsidiary of India’s Adani Group, is to develop transmission lines and substations.

Ketraco said AESL submitted a Privately Initiated Proposal (PIP) in compliance with the provisions of the PPP Act and was subjected to evaluation and due diligence before a determination was made to award them the projects.

AESL will implement the projects under the Build-Own-Operate-Transfer (BOOT) arrangement. 

Under the BOOT arrangement, AESL will finance, design, construct, operate and maintain the projects. 

The projects are: 

1. A 400kV Gilgil-Thika-Malaa-Konza transmission line, associated Line In and Line Outs (LILOs), new substations and substations extension, including 132kV intertie to existing 132kV system at Thika. 
2. A 400/220/132kV Rongai Substation and 220kV Rongai-Keringet-Chemosit Transmission Line, associated LILOs, new substations and substations extension including 132kV Intertie to existing 132kV system at Chemosit. 
3. A 132kV Menengai-Ol’kalou-Rumuruti transmission line, new substation and substations extensions. 
4. A 132/33kV Thurdibuoro substation and associated LILOs at Thurdibuoro.

Ketraco said these projects are all set address rising electricity demands across Kenya.

The deal will have Adani raise all the funding in the form of debt and equity, to be repaid over the 30 years of the project agreement.

The project is expected to cost $736 million and will be implemented through a competitive bidding process by Ketraco and Adani.

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Electricity infrastructure project to improve supply in Kenya

Ketraco said the proposed projects will connect existing and new load centres, eliminate constraints in the grid by providing alternative supply routes, reduce power outages and evacuate additional power to the grid. 

“These benefits will result in an exponential increase in power demand and increase in power consumption, reduction of technical losses and improved resilience in the grid. 

“These qualitative benefits traditionally lead to improved quality of supply and subsequent tariff reduction,” said Ketraco. 

Ketraco said Kenya’s power transmission network is currently operating at 132kV, 220kV, 400kV & 500kV. 

The size of transmission network (500kV, 400kV, 220kV and 132kV) by circuit length is approximately 9,105 km of which 5,638 km (61.92%) is owned and operated by Ketraco. 

In addition, Ketraco has completed and commissioned 42 new substations with 6,396 MVA capacity and 31 bay extensions. Electricity demand has grown to the current peak demand of 2,239MW. 

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Current infrastructure not coping with growing electricity demand

Ketraco pointed out that Kenya’s electricity transmission infrastructure is currently inadequate to meet the growing demand for power, particularly in rapidly industrialising regions and underserved rural areas. 

“The existing transmission lines are constrained, leading to inefficiencies and occasional power outages. 

“The lack of sufficient transmission capacity is a barrier to industrial growth, rural electrification, and the integration of Kenya into the regional energy market.” 

Ketraco said the expansion of the national grid in the 20 years electricity sector Least Cost Power Development Plan (LCPDP) and its own Transmission Master Plan (TMP) requires expansion growth of a further 9,600 circuit km of transmission lines and 15,891 MVA substation transformation capacity. 

“The TMP has identified approximately 90 transmission infrastructure additional projects needed to meet the peak demand expected to reach 10,000MW by 2042.” 

Ketraco said the total investments requirement for this period is estimated at nearly $5.2 billion. 

This is approximately $250 million per year for 20 years.

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The route to partnering with the private sector

In deciding to seek a private partner for the projects, Ketraco said that since its inception in 2008, Kenya’s National Treasury has borrowed loans directly from development partners for transmission infrastructure capital investment and subsequently on-granted the funds to Ketraco for project development. 

Typically, the historical project circle turnaround time for the development financing partners and Ketraco has been between five to eight years. 

“Thus, the next set of funding from development financing partners is estimated to be after FY 2028/2029. 

“In this regard, it is imperative for Ketraco to tap into the other financing models, including the private sector’s potential to bridge the financing gap.”

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