10 April 2018

Kenya: Power, Politics and Economy of the Coal-Fired Plant in Lamu

Photo: Daily Nation
Residents and activists protest in Lamu town in 2016 against the planned Sh200 billion coal power plant.
opinion

On Saturday May 10, 2014, Chinese premier Li Keqiang was driven to Nairobi's State House to formally sign the agreement on the multibillion-shilling standard gauge railway project -- one of Jubilee government's flagship projects.

Tied to the success of the SGR project was the exploitation of Kenya's coal fields and the building of a coal-fired thermal electricity-generating plant in Lamu -- a multibillion shilling venture even by international standards. The plant was to provide dependable power, not only for the new railway, but also for the proposed Sh1.5 trillion Lamu Port-Southern Sudan-Ethiopia Transport project.

For President Uhuru Kenyatta's government, this is a legacy project.

NATURAL RESOURCES

The discovery of coal in 2010 at Block C and D of Mui Basin in Kitui and Mwingi had already attracted the Chinese firms, which were competing for a slice of Africa's natural resources. More so, China was encouraging its billionaires and state companies to scout for mega projects in Africa as it sought to replace the traditional Western donors through its no-strings-attached loans and grants, and via mega infrastructure projects.

The coal mining was one of them, and it required political support at each and every turn.

When the first tenders for the exploitation of the coal fields was done, Kenyan millionaire George Kariithi decided to go for it through a company he co-owns with a New Zealand national Ian See.

CONNECTIONS

The company, Great Lakes Corporation, had entered into a consortium with China's Fenxi Industry Mining Group, whose faces were two directors -- Li Yuxin and Wang Yusheng. Together, they had formed a special purpose vehicle -- Fenxi Mui Mining Corporation, which was to invest $500 million in exploitation and production of coal.

Initially, Mr Kariithi, a pharmacist, had flown to China to seal the partnership with Fenxi, which has many years experience in mining coal.

Whether he had political connections or not depends on whom you ask. "I wish I had," he once told this publication.

Two days to the Christmas festivals of December 2013, Energy CS Davis Chirchir drove to the Musila Garden's in Mwingi Town to give Kariithi's consortium the much-needed political boost. It was the day that Mr Wang Yusheng, the man Mr Kariithi had met in China, would sign the deal between Fenxi and the national government for the 21-year mining concession.

LICENCE

The firm was to first pay $3 million as concession fees for Block C, special exploration licence levy at $4 per square kilometre, Environmental Impact License fee at $11,110 and special mining lease fee at $21,000 per year.

The signing did not go down well with some locals, who felt that Mr Kariithi was an 'outsider' -- and that the concession should have gone to Mui Mines and Minerals, which was owned by Kitui-based entrepreneurs and which was knocked out at the preliminary stages.

Although a Benefit Sharing Agreement (BSA) was signed, political intrigues and a push by the locals to have a separate addendum became the new stumbling block. And although a technical committee led by then Kitui Senator David Musila was picked to reread the BSA and propose amendments to protect the interests of the community, this has not been signed.

COAL FIELDS

While China was pushing to have a say in Kenya's coal fields -- as part of its strategy to exploit natural resources in Africa -- critics in the Western capitals see the Chinese involvement as overwhelming to the continent. The aim was to have Chinese firms have a foothold on the continent where it could drive the transport and energy sector.

It is no wonder three years after Li Keqiang's visit to Nairobi, President Kenyatta was in China where he witnessed Energy CS, Charles Keter sign the Sh206 billion deal between China Power Global and Kenya's Amu Power, a consortium that is behind the building of the Lamu coal project that will build a 981.5 Megawatt coal-fired thermal electricity-generating plant in the Manda Bay area.

Lamu coal power plant is a paradox. While Mr Li has vowed to "make China blue again" by cutting down on the use of coal to power its energy firm, China Power Global is involved in the project in Lamu where it will build the $2 billion coal plant on 974-acres near the Indian Ocean.

CLEAN ENERGY

For the last few years, China's coal giants have been seeking to export coal-intensive technologies abroad and as Beijing consciously attempts to end its coal-fired growth and replace it with clean energy, its companies are looking towards Africa where they could make money.

Besides the Chinese, this Lamu project is also being driven by Kenya's Centum Investment, whose majority shareholder is tycoon Chris Kirubi together with Gulf Energy -- a firm linked to a former Cabinet minister from Mt Kenya region. Previous court documents filed by a shareholder, Mr Khelef Khalifa, had named Nama K Ltd, Monte Carlo Investment Ltd, and Mr Francis Njogu as the Gulf Energy shareholders.

CENTUM INVESTMENTS

Centum Investments and Gulf Energy have incorporated Amu Power as the special purpose vehicle for the consortium that includes Sichuan Electric Power Design and Consulting, China Huadian Corporation Power Operation Company and Sichuan No.3 Power Construction Company.

Once completed, if the environmental activists do not have their way, the Lamu coal power plant will be the largest private sector-led infrastructure project in East and Central Africa, although at a cost.

The Lamu project is one of the hundreds of coal-fired power plants that China is building around the world, as it cuts down on them at home. This is because China, the world's largest emitter of coal, now is exporting that technology to those who want it.

FOSSIL FUELS

"The end of coal-fired growth does not mean coal will be entirely phased out... It does mean that China will no longer depend on rising coal consumption to power its development," argues Ye Qi, the director of Brookings-Tsinghua Centre, a public policy organisation based in Washington, DC.

With pollution alone killing an estimated 1.1 million people a year in China, even the Communist Party has declared war on it. Last year, Premier Li Keqiang vowed to "make our skies blue again" by decreasing use of fossil fuels and embracing wind and solar power.

The Chinese government has said it aims to close 100 million-150 million tonnes of steel capacity and 800 million tonnes of outdated coal capacity by 2020.

But local politicians -- across the divide -- support the Lamu project even as it faces criticism from environmental groups.

TECHNOLOGY

The issue is the kind of technology that will be employed in Lamu. During the presidential campaigns, opposition leader Raila Odinga said clean coal technology is acceptable and that the issue should not be looked at emotionally. Also, Deputy President William Ruto accused Lamu leaders of inciting people to oppose the project which is "as big as the entire KenGen!"

It is the grand coalition government which started scouting for investors into the coal fields. Both Mr Odinga, then Prime Minister, and Mr Ruto visited some plants in India which were producing clean energy.

CHEAP POWER

"We cannot bring a project that can harm environment and the children," said Mr Ruto while asking Lamu residents to embrace the project.

Whether Kenya should take the Chinese funded coal plants is causing concerns in Western capitals, which drove their industrialisation by using coal. With Africa's acute shortage of cheap power, whether to take a gamble on the environmentally harmful coal or to wait for the snail-paced development of clean energy is a tricky balance.

Kenya

MPs Want Election Team to Resign

The National Assembly's Justice and Legal Affairs Committee now wants the three remaining top officials of the… Read more »

Copyright © 2018 The Nation. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 800 reports a day from more than 140 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.