Word Bank arm guarantees Gulf Energy Sh2.44bn loan

East Africa Community leaders Zanzibar President Amani Abedi Karume, President Mwai Kibaki of Kenya, Paul Kagame of Rwanda (EAC chairman) and Pierre Nkurunziza of Burundi after the official opening of 2nd EAC investment Forum in Nairobi in July, 2009. Photo/ANTHONY KAMAU 

By John Gachiri

In Summary

• The agency said the guarantee will make other banks more comfortable when lending to the energy sector, which requires huge funding for long periods

The Multilateral Investment Guarantee Agency (MIGA), an arm of the World Bank Group, has guaranteed Gulf Energy a Sh2.44 billion loan.

The guarantee will safeguard Standard Bank from losses arising from war and other disturbances that may impair the Athi River-based power producer’s ability to service the debt over the next 15 years.

The agency said the guarantee will make other banks more comfortable when lending to the energy sector, which requires huge funding for long periods.

“MIGA’s ability to extend long tenors is playing an important role in helping countries attract investment into capital-intensive projects such as power plants,” said MIGA chief executive Keiko Honda in a statement.

Gulf Power is a thermal power produce with an 80 megawatt (MW) capacity.

Massive capital

The World Bank’s private lending arm, the International Finance Corporation, also invested Sh2.4 billion in Gulf Energy back in November 2012.

MIGA said that Kenya needs to invest Sh438 billion in the power sector by 2015 which will require more guarantees to attract the massive capital needed by the industry.

“Our collaboration with MIGA is helping lenders get comfortable with the risks, and ultimately delivering a diversified energy mix to meet the huge demand for power generation,” said Stefania Berla, IFC director syndicated loans and management.

The preliminary prospectus on Kenya’s sovereign bond, sold two weeks ago, says that the country needs $25.5 billion (Sh2.2 trillion) for massive power projects over the next five years.

The Eurobond prospectus says that $16.8 billion (Sh1.47 trillion) is needed to put up the High Grand Falls dam (700MW), the Magwagwa dam (120 MW), Arror dam (60MW) and Nandi Forest dam (50MW).

Another $8.7 billion (Sh726 billion) will be spent on the Olkaria, Menengai and Silali-Bogoria geothermal power plants. All projects should be completed in 2018 and will be financed through public-private partnerships (PPPs).