Most industries performance is considerably affected by constant power cuts. In fact, power supply in Kenya still does not match demand. What plans do you have to improve the supply of energy? What is the Energy Sector reform Program?
It is true that the supply of energy cannot cope with the existing demand. The reason for this is that, until 1996, no major new projects had been implemented, and because of this delay, the situation has become more critical. Urgent measures have been taken to alleviate the shortage. We have put in place two fast track Independent Power Producers (IPPs), one in Nairobi, and one in Mombasa. Both of these have a combined energy generation of 88 Mw which does not go far enough to bridge the gap between supply and demand. Since then, we have put active programs in place to ensure that supply and demand meet no shortage. There are a number of projects that are being undertaken.
Kipevu I - generates 75 Mw of power - Thermal
Gitaru Hydro project - generates 72.5 Mw
We have gone on tender for two fast track IPPs - generating 55 Mw each, i.e. a combined output of 110 Mw.
Signed a power purchase agreement, another IPP Kipevu II- generating 75 Mw.
IPP Geothrmal Ol Karia III - 64 Mw.
Ol Karia II - a public sector funded project by multi-lateral donors e.g. the World Bank- generating 64 Mw.
Sondo Miriu Hydro project - construction has started and it should be on by the year 2002 - generating 60 Mw.
Are all these projects already working?
Kipevu I - on stream in September, 1999
Kipevu II - construction to begin at the end of 1999 and should be on stream by the end of 2000.
Ol Karia III - on stream by the year 2002.
Gitaru - on stream some time next year, 2000.
This means that by the year 2004 we should have 550 extra Mw to add to the existing base-load generation of about 870 Mw. As you can see, this is a very ambitious program. By the year 2002 we should have broken even and probably have a surplus. The growth demand can thereafter be taken care of by programs to follow. Between now and the year 2002, power cuts will be a lesser problem, a thing of the past.
What international agreements have you entered or are you about to enter in order to develop the energy sector?
Hydro projects, by their nature, are not very attractive to investors. That is why multi-lateral firms like the World Bank, OECF, etc. come in and finance on long term basis. On the other hand, IPPs are commercially attractive to investors. We sign 15-year contract periods. The returns are better and more attractive to investors. Geothermal and thermal projects are more attractive to investors who want quick returns. Hydros take long to construct and the returns are not as attractive. We are taking on both at the same time. Sondu Miriu and Ol Karia II are under the auspices of KENGEN, which is 100% Government owned. IPPs are purely 100% private sector. The energy sector is able to cope with both. They compete one against the other. Both KENGEN and IPP projects generate electricity and sell it to one entity, Kenya Power & Lighting Company who then retails it to the consumer.
Sudan has discovered oil deposits and has just recently started commercializing internationally. Kenya has for some time been prospecting oil and gas. What been the results?
There are two oil potentials, one at the Coast and the other one in the Rift Valley, in Northern Kenya. We have not gone far enough to establish whether it is commercially viable. We will focus on these two areas. The National Oil Corporation, deals with geological exploration compiling data into brochures and selling these brochures to oil prospecting companies. These brochures contain a lot of useful geological information.
The Petroleum Sector in Kenya is one of the most deregulated in Africa, allowing oil companies to import and sell freely. What effect has it had on local Industries, are they being swallowed up by multinational companies?
The major players are the multinationals who have 90% of the market. There are very few local companies: Kenol/Kobil and National Oil Corporation (NOCK). The consequence of deregulation is that there have come up a lot of small players and the competition is cutthroat. The way the economic situation is, forces people to go for the cheapest deal. Because of liberalization, unscrupulous business people have come in and they do not follow the laid down standards, they do not look at safety and environmental considerations. We are now clamping down on these unscrupulous dealers who are flouting safety standards. | Your Ministry concentrates mostly on the development of conventional energy source: oil and electricity from water dams. What plans do you have to develop cheaper alternative energies (Wind, Solar, etc..)?
Studies funded by the World Bank have been going on and we are still in the early stages to see how best we can exploit other potential sources of energy, in particular wind, solar and biogas. This is an interesting area for potential investors.
About 70% of domestic energy consumption is in the form of wood or charcoal. Is your Ministry setting up educational programs in order to change the use of this type of energy for more environmentally friendly ones?
There are active programs in the Ministry of Environment and Natural Resources in afforestation. If there is sufficient afforestation to cater for all the trees that are brought down, then we will have ecological balance and will not end up with dessertification. The Ministry of Energy is involved with energy saving stoves - (cooking appliances). Due to insufficient funding, energy programs have not been very active. We have set up energy centers in every province where people are educated on planting trees, on the development of energy saving stoves etc.
In the urban areas there is an excess of gasoline fumes from cars, matatus, etc. How is the Ministry of Energy planning to reduce pollution?
Most products come from the Refinery in Mombasa, which is fairly ancient. There are plans to modernize it, to reduce its lead and its sulfur content and to improve the output of white oils. The Government owns 50% of shares in the Refinery. The other 50% is owned by oil companies. The modernization project to completely bring up-to-date the refinery will cost about US$ 100 million, so that the latest technology can be employed. The end result is that the final product would be of higher quality.
What are the prospects for Kenya's Energy sector for the next millenium?
The entire economy has a problem of macro-economic stability. As you know, we are running huge domestic debts. We need foreign direct investment to save the economy. There are plans to liberalize the transmission and distribution aspects of electricity. We need to have private investors, both foreign and domestic, to invest more cheaply and efficiently and at a profit for them.
Is the Ministry trying to expose these new plans internationally?
There is what we call International Competitive Feeding. We advertise in international media, e.g. World Bank publications, Time Magazine etc., which reach a large readership. For example, on advertising for the two fast track projects, it attracted a total of 35 bidders.
Could you give us some background on the Pipeline?
Finished products imported into Kenya are channeled through the pipeline to Nairobi, Eldoret and Kisumu. This is the most economic and efficient way to transport petroleum products. The pipeline is 100% Government owned. The pipeline may soon privatize 10-15% of its shares and it will be open to all investors, foreign and domestic. This will be by next year (2000). Concluded studies recommend the extension of the pipeline from Eldoret all the way to Kampala. A promotional document is being prepared to source for investors.
Are you in touch with any private organizations in order to do that?
The Government's focus is to open up the sector to private participation. This is the most efficient approach, and it will go a long way in helping the energy sector to grow. We would like to make electricity available to the common man in the rural areas. A very comprehensive rural electrification program is being undertaken, but the funds are limited. The funds available come from the 5% levy imposed on the consumption of electricity. This is what is used for the rural electrification program. We have been given money by the Spanish and the French Governments. This will encourage the opening of cottage industries.
Any final Message?
Despite what one may read in the media, Kenya is still the No.1 investment destination in Africa. Infrastructures may be worn-out, but it is still the most sophisticated in Africa. Investors should bring their money here. Political stability in Kenya is better than in any country in Africa. |
