The African Development Bank (AfDB) has exited a multibillion-shilling renewable energy project in Nairobi’s Kibera slum due to multiple delays in procuring services to kick-start the venture.
The continental lender had in January 2018 awarded Asticom Kenya Limited a $995,000 (Sh128.8 million at the current exchange rate) grant for the planned 12 megawatt (MW) Kibera Waste-to-Energy Plant.
The bank, through its Sustainable Energy for Africa (Sefa) facility, released part of the grant to enable the project to become bankable to attract additional investors. However, the project never kicked off due to multiple procurement delays.
Since the award of the grant nearly six years ago, Asticom has only managed to complete one of the three desired outputs, forcing the lender to cancel the grant after giving the company an initial Sh16.8 million, or about 13 percent of the total amount.
“The project was not successful in reaching financial close and hence getting the bank involved after preparation and to provide an opportunity for the bank’s private sector window to take a lead role in the debt financing/investment phase of the project was no longer relevant,” the lender said in a project completion report published Friday.
“The grant expired before all activities could be concluded due to many procurement-related delays.”
The funding from AfDB, added to a Sh1.6 billion ($12.7 million) grant the company had received from the United Nation’s Climate Technology Initiative (CTI), was to help it in the initial creation stages and bring it to fruition before it could be able to attract additional investors.
The funds were to cover the costs for an environmental and social impact assessment (ESIA) report, a detailed engineering design for the plan, a business plan and financial model, and legal documents.
But, by the time of the expiry of the grant at the end of 2019, Asticom had only managed to hire a contractor to develop the ESIA report, which was yet to be approved by the National Environmental Management Authority (Nema) as of December last year. The other three desired outputs had not kicked off.
“None of the outputs was fully achieved, only one was partially achieved. This was due to procurement-related issues,” AfDB said in the completion report.
“In hindsight, it appeared that the project sponsor did not have the requisite procurement capacity and was insufficiently familiar with bank rules and procedures.”
While the bank could have extended the grant deadline to allow Asticom to implement the stated outputs, it decided against it because of a “problematic sponsor (the company), breakdown in professional relationship and trust between the sponsor and the bank.”
‘Wrong assessment’
Had it kicked off, the Kibera plant would have been Kenya’s first waste-to-energy power plant, a significant milestone in the wake of urban waste menace and climate change threats, which may now no longer be achieved in the foreseeable future.
The plant was supposed to generate 10 megawatts of energy at full capacity by 2021, create at least 250 jobs, and reduce Kenya’s greenhouse gas emissions by 315,000 tonnes of carbon dioxide equivalents by 2022.
It would convert municipal solid waste, crop residues, and livestock waste into biogas fuel and use it to generate electricity.
According to the AfDB, it was to significantly “contribute to sustainable economic growth through the provision of renewable energy or power at a competitive cost.”
While the entire project fit into the lender’s 10-year strategy at the time, country strategy paper, and Kenya’s vision 2030, the bank now admits it had wrongly assessed the company’s capacity to execute the project, as it assumed it could since it had recently bagged the Sh1.6 billion grant from CTI.
“This experience underscores the importance of a thorough and correct assessment of procurement capacity before approving a grant,” the bank said.
