Kenya – Lake Turkana Wind Power was talking to the World Bank and ATI for the guarantees

The government backtracked on its promise to offer credit guarantees to several planned renewable energy projects, disrupting investors’ timelines to roll-out and threatening to affect their project pricing because of delay.

The World Bank offers political risk insurance and credit guarantees through the Multilateral Investment Guarantee Agency (MIGA) that insures eligible projects against losses relating to currency transfer restrictions, expropriation, war and civil disturbance, breach of contract and non-honouring of sovereign financial obligations.

ATI is owned by some African governments and development organisations to offer insurance against similar risks. “Renewable energy investors are very happy that ATI has sought to find a solution to this issue and we are now confident that we shall be able to move on with implementation within our planned time,” said Mr Wageningen.

“We are looking at having either MIGA or ATI, or a hybrid of the two. However, the World Bank process is rather slow and we have in the meantime developed an in-house solution that we hope will be approved by the government as a stop-gap measure,” he added.

ATI confirmed that it has been holding discussions with several renewable energy investors in relation to seeking credit guarantees, but declined to name the companies it was discussing with.

“We have been approached by some firms but we aren’t at liberty to give out details because these deals are still in the pipeline,” said Sherry Kennedy, head of communication at the ATI.

“The investors are trickling in. We understand that government has extended discussions to MIGA and the International Finance Corporation to ensure adequacy of the guarantees,” she said.

The government late this year declined to offer credit guarantees for projects because that would have exposed the country’s foreign exchange reserves to a lot of pressure, affected the stability of the shilling and increased the level of public debt, the Central Bank of Kenya said.

But this development also threatened to derail Kenya’s Vision 2030, whose achievement requires the country to scale up electricity generation using renewable energy sources, whose capacity is not affected by weather changes, unlike the current predominant hydro power sources.

The new efforts by the World Bank and ATI are a major win for renewable power investors who had panicked following the government’s move.

Their planned investments were further threatened when the government announced in September that companies with renewable energy licences have up to two years from January 2011 to start their projects or forfeit those licences.

Those holding renewable energy licences for mega projects include Osiwo Wind, Prunus Wind Farm, Windflow, OrPower4, Aureous Kenya, KenGen, Gitson Energy, and LTWP.

The Business Daily did not obtain progress of the other players in seeking credit guarantees by the time of going to press.

LTWP said that if its discussions with the government are successful, it plans to have all the financing issues sorted by June 2011, roll-out the project and be able to produce the first 50MW of electricity after 15 months.

The other 250 MW will be ready 29 months from June 2011. The company requires an estimated Sh65 billion for the whole project.

“If we have further delay from these dates, then we shall have to review all our costs,” said Mr Wageningen.

ATI has offered to provide guarantees of up to $100 million (Sh8 billion) to investors, but said the amount can be scaled up on a need basis.