The African Infrastructure Investment Fund 2 (AIIF2) and Norwegian Investment Fund for Developing Countries (Norfund) said Tuesday they have signed a 150 million U.S. dollars agreement to construct Kenya's wind park project.
The 60.8 MW Kinangop Wind Park project comprises the construction, financing, operation and maintenance of a 60.8 MW Greenfield wind park located in the Kinangop region, about 80 km northwest of Nairobi.
African Infrastructure Investment Managers (AIIM)'s Regional Director for East Africa, Kameel Virjee said the AIIF2 reached final close in September 2011 with total commitments of 500 million dollars.
"AIIF2 is designed to invest equity in a diversified infrastructure and infrastructure related assets portfolio, primarily within Sub-Saharan Africa. AIIF2 recognises that effective infrastructure is vital for economic growth and development of the African continent," Virjee said in a statement issued in Nairobi.
"As the continent becomes an increasingly attractive investment destination, through the improvement of political risk and corporate governance, the role of infrastructure in the development of the continent has become more apparent."
Kinangop Wind Park is the first independent large-scale wind farm in East Africa and a landmark transaction for both the African power sector and the project finance market.
The largest is the Lake Turkana Wind Power who construction is planned to start by 2014 to generate 300 MW when it eventually starts. Also Aureous Wind plans 60 MW of wind power in Kinangop, Central Kenya.
Progress of wind power generation in Kenya has been slow, attributed partly to the long time it takes to collect wind data and the huge investment outlay needed to finance the projects.
Kinangop Wind Park has already signed a power purchase agreement with the Kenya Power Company, which guarantees that the power distributor will bull all its electricity for onward sale to consumers.
Power generator, KenGen that is majority owned by the Kenya government is also expected to add 21 MW of wind generated electricity to its current generation of 5.1, located at Ngong Hills, 29 km northeast of the capital.
AIIF2, which is advised by AIIM, a joint venture between the Macquarie Group and the Old Mutual Investment Group, is a majority owner in the project company, Kinangop Wind Park Limited (KWP) while Norfund owns the remaining shares.
The two investors teamed up with project developers, Aeolus Kenya Limited, in 2012 to support them in bringing the project to financial close.
Through their investment in KWP, AIIF2 and Norfund will promote sustainable and environmentally friendly electricity generation in Kenya.
The project will be built by Spanish construction company, IberdrolaIngenieria Construction, which will install 38 General Electric 1.6 MW wind turbines.
The Project will start feeding electricity into the grid in the first quarter of 2015 and full commercial operations are expected to commence in July 2015.
The shift to renewable energy is also meant to ensure the company has a dedicated revenue stream without hurting the economy with high electricity prices.
KenGen is listed at the Nairobi Stock Exchange although the government still controls 70 per cent of the company.
KenGen is also actively involved in the exploration and tapping of the geothermal steam supplying the bulk of the 130 megawatts of geothermal generated electricity to the national grind.
The company is currently investing in a four-phased geothermal project to produce 280 MW from the resource by 2013.