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Multilateral insurer Atidi underwrites its first energy project in Kenya
A geothermal well at the Menengai Geothermal Development Company (GDC) project in Nakuru County on June 7, 2023. Atidi is underwriting the payments that Globeleq expects to receive from Kenya Power for its 35-megawatt geothermal power plant in Menengai.
Nairobi-based African Trade and Investment Development Insurance (Atidi) will guarantee the payments Globeleq expects to receive from Kenya Power, from its 35 megawatt (MW) geothermal power plant in Menengai, offering a significant boost to the British-owned power producer.
The deal will see Atidi provide a payment guarantee to Globeleq in case of any payment delays or non-payment for selling electricity to Kenya Power Company (KPC) under a Power Purchase Agreement (PPA). Atidi is owned by regional governments, including Kenya, besides institutional investors like Kenya Re.
Kenya Power recently struggled to make timely payments amid a dollar crunch that hit it for the larger part of 2023, underscoring the impact of the Atidi deal in giving comfort to power producers.
Globeleq is building a $117 million (Sh18.34 billion) geothermal plant in Menengai and expects to start selling electricity to Kenya Power next year upon completion of the plan.
“Atidi is solely providing a buyer payment security through its flagship renewable energy guarantee instrument, Regional Liquidity Support Facility (RLSF), that protects independent power producers (IPPS) from payment delays or non-payment by State-owned utilities under the terms of the PPA and Project Implementation and Steam Supply Agreement entered into by the Globeleq with offtaker –KPC and GDC respectively,” Atidi said.
RLSF is a guarantee instrument offered to renewable energy IPPS.
The assurance from Atidi comes months after the British renewable energy firm secured a $49.5 million (Sh6.39 billion) guarantee for the same project and a solar plant in Malindi, from the Multilateral Investment Guarantee Agency which is the project guarantee fund of the World Bank.
The 52 megawatt-peak (MWp) Malindi solar plant has been supplying electricity to KPC since December 2021 in a 20-year power purchase deal. The Menengai plant is currently under development.
The guarantee covers the Malindi and Menengai plants against risks such as election related violence, threat of seizure of its land for public use and breach of contract.
Atidi’s deal to underwrite Globeleq’s geothermal plant in Menengai marks the first such payment security that Atidi is providing in Kenya under its RLSF programme, even as the Pan-African insurer said that more power producers are keen on this guarantee.
Globeleq is one of the three IPPs licensed to build geothermal power plants in the Menengai region.
Each of the geothermal plants has a capacity of 35MW. The others are OrPower 22 and Sosian Energy.
“Kenya is fast becoming an interesting zone for renewable energy developers and we have received enquiries from developers requesting liquidity/guarantee instruments such as RLSF for consideration to make their projects more bankable to Lenders and enable the projects reach financial close,” Atidi said in a statement.
Payment guarantees are key in comforting lenders to provide the much-needed capital for IPPs to build power plants and supply electricity, significantly helping efforts to increase electricity access.
Sosian Energy, which is linked to the family of the late President Daniel Moi completed its plant in 2023 and has since been supplying electricity to Kenya Power.
Globeleq’s plant is jointly funded by African Development Bank, the Eastern and Southern African Development Bank and the Finnish Fund for Industrial Co-operation.
