The Japanese Government has pledged a Sh40.6 billion loan to finance construction of a new 140MW unit at the Olkaria Geothermal Fields in Naivasha.
The loan will enjoy a 10-year grace period before repayment starts at 0.2 per cent interest for the next 30 years.
Finance Cabinet Secretary Henry Rotich and Japanese Ambassador to Kenya Tatsushi Terada, signed the agreement on behalf of their respective governments.
Mr Rotich, who was accompanied by Energy Cabinet Secretary Charles Keter, said Kenya is on course to meet its 5,000MW electricity target through its numerous partnerships with development partners and private investors.
He said several solar, wind and geothermal projects are currently under way, adding that the power they generate would be loaded onto the national grid, enabling Kenyans to enjoy cheap green electricity in their homes and industries.
FAST-TRACK INDUSTRIAL ZONES
Mr Terada urged Kenya to urgently fast-track establishment of industrial zones next to electricity production plants to take advantage of new power being generated more cheaply, making the nation a preferred destination for investors, especially from the manufacturing sector.
The project, to be completed in the next two years, will see two generation units installed that will add 140MW to the Olkaria Geothermal capacity, which stands at 513MW.
Mr Keter said the Turkana wind power project is well within schedule, with the first 90MW set for addition to the national grid by December this year, while the remaining 210MW will be loaded mid next year.
Menengai Crater's 105MW project is also under way, with three independent power producers contracted to put up generation units while Akiira Geothermal Ltd is also working on a new project at Longonot area in Naivasha, seeking to produce 140MW by early next year.
This, said Mr Rotich, would enable Kenya to reduce reliance on environmentally harmful diesel plants in favour of the sustainable and stable geothermal sources.
Mr Terada said Kenya's 10,000MW geothermal potential should be tapped to help ease the cost of power and spur industrialisation which, he said, would see prices of manufactured goods reduce drastically.
Mr Rotich said the additional power injected into the grid recently had seen electricity bills fall by over 30 per cent.