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Kenya: Olkaria II's Cost Shoots Up By Sh325 Million
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Business Daily (Nairobi)
17 March 2008
Posted to the web 17 March 2008
Geoffrey Irungu
The cost of Olkaria II geothermal project has shot by up by $5 million (Sh325 million) due to a surge in prices of building materials.
The World Bank is expected to provide the additional financing for the project as well as other projects meant to improve access to electricity in urban and peri-urban areas with a total outlay of $50 million (Sh3.3 billion). Olkaria was initially to cost $87.5 million (Sh5.7 billion).
"The contingency amount of $5 million would cover the rising escalation for steel and related electrical materials required for the generating plant," a proposal document by the World Bank says.
The proposal will be put before the bank's board for consideration early next month. The European Investment bank ($40.8 million), IDA ($24.1 million) and KenGen (counterpart funds) are financing the project.
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Under the contingency tranche the government will chip in a token $1 million as a show of commitment, bringing Olkaria II's cost to over Sh6 billion. The urban electricity access programme is part of the ongoing energy capacity enhancement project meant to help the country match power supply and demand.
Peak demand stands at 1079 megawatts versus an effective generation capacity of 1148 megawatts. Consumption has therefore eaten into reserve capacity which at all times should be above 15 per cent of demand. The reserve, which presently stands at 4 per cent, is meant to ensure continuous supply especially when some plants go for maintenance or are taken down.
The proposal, under the Kenya - Energy Sector Recovery Project Additional Financing, would also avail $13.3 million (Sh865 million) to support feasibility and design studies on various issues.
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