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).
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