Local Investors can play a key role in financing access to energy

Posted Oct 29, 2009 | 0 | Filed under:

The just completed Infrastructure bond by KENGEN clearly indicates that there is the demand ( the bond initially set out to raise $200M ) and the capacity - local retail investors bought $284M worth, which was 85% of the issue.

Clearly the Kenya market has the liquidity and the desire to invest in energy projects. What is missing are the viable investments. The policy framework on independent power producers while not perfect, is relatively strong, the demand for electricity currently outstrips existing supply and this is only at 18% electrification.

If there are local dollars available to invest in power generation projects, and the policy framework exists, what then, is the limiting factor to a robust electricity generation and distribution infastructure in Kenya?

The answer is technical capacity. With the exception of the major energy producers such as KENGEN, OrPower, Iberafrica and Tsavo, there exists limited ability by smaller players to generate power. Smaller players being from a few kW to several MWs and more often than not, utilizing renewable energy sources.

Anyone who has done business in Kenya knows how competitive the environment is. Try investing in any one new business line and should others see it as a profitable investment, you will have a multitude of investors as your competition. If we apply this understanding to the energy sector, what is needed is some demonstration, nay, a real investment with profitable and demonstates the viability of investing in the energy sector, and before long, there will be enormous investment in the generation of electricity. A robust framework is currently being developed at the Energy Regulator to accommodate this level of investments to ensure quality in power as well as fair pricing.

We at Renewable Energy Ventures are working hard to develop our initial pipeline of projects and we believe that these projects if used as a reference point, will play a significant role in catalzying many distributed generation projects around the country.