LONDON (Thomson Reuters Foundation) - Two major renewable energy projects in Kenya and Sierra Leone took big steps forward this week in a boost to the sector in sub-Saharan Africa.
Standard Bank Group said it had signed a deal with independent power producer Aeolus Kenya (AKL) to build a $150 million wind power plant in Kenya.
AKL is a member of the Power Africa initiative led by U.S. President Barack Obama, which is developing 1 gigawatt (GW) of wind, geothermal and gas-fired power projects in East Africa.
The 60.8 megawatt (MW) Kinangop Wind Park in central Kenya, first announced in 2011, will provide electricity to 150,000 Kenyan households and will be the largest wind power generation project to be constructed in sub-Saharan Africa outside of South Africa, the companies said in a statement.
The plant is expected to come on line in mid-2015, and the Kenyan government will be the main buyer of the power produced, expanding the capacity of the country's 1,672 MW national grid.
"The project is designed to provide a clean source of electricity to Kenya. It will not only contribute to the social and economic development of Kenya, but will also significantly help ease the energy supply deficit that the country is grappling with," said Kwame Parker, Standard Bank’s East Africa head of debt solutions and infrastructure finance.
Kenya relies heavily on hydro-electric dams for power, which are often challenged in times of recurring drought, the statement added.
The Kinangop wind plant has also been registered under the United Nations Clean Development Mechanism (CDM), which enables projects to earn certified emission reduction credits, each equivalent to one tonne of carbon dioxide. Countries that need to offset their greenhouse gas emissions to meet targets under the Kyoto Protocol can buy these credits.
Standard Bank will underwrite $90 million in syndicated debt financing for the construction of Kinangop, while Norway’s Norfund and a large Africa-focused international infrastructure investor will provide $60 million in equity.
The Kenya wind farm is the first deal Standard Bank – Africa's largest bank by assets – has concluded in East Africa's renewable energy sector, but it is eyeing more. It has signed mandates to develop other wind farms in Kenya, some of which will be larger in size, it said.
"There are also significant opportunities to finance renewable projects in the hydro and geothermal energy sectors in East Africa. There is a growing interest in renewable energy in the region and Standard Bank is positioned to play a major role in this sector,” Parker said.
SUGARCANE IN SIERRA LEONE
Separately, in West Africa, Addax Bioenergy said its Makeni project in Sierra Leone has become the first in the country to be registered under the Clean Development Mechanism. It is also the first sugarcane-based power generation project for ethanol production to be registered under the CDM in Africa, it added.
The Addax Bioenergy project consists of a 10,000-hectare sugarcane plantation, a bioethanol refinery and an electricity plant fuelled by sugarcane residues, which will provide power and heat to the refinery. With a capacity of up to 15 MW, it will also generate 120 gigawatt hours (GWh) per year for the national grid, representing around 20 percent of Sierra Leone's electric power.
The project will become operational in early 2014 and will reduce greenhouse gas emissions by 56,000 tonnes of carbon dioxide per year by replacing fossil fuel-intensive electricity production, the company said in a statement. The bioethanol will be exported, as well as used domestically, according to an FAQ on the project.
Geneva-based Addax Bioenergy is a subsidiary of private investment group AOG and was formed in 2008 with the aim of developing a sustainable investment model for biofuels in Africa. For the 267 million euro ($363 million) project in central Sierra Leone, it has partnered with eight European and African development finance institutions.
Some environmental campaigners have raised questions about the impact of the Makeni project on local people and their livelihoods. In September, Action Aid – an international development charity that opposes the expansion of crop-based biofuels – released a report saying the lease of land for the sugarcane plantation had cut food production and caused hunger in the area.
It described compensation for land loss as "poor" and wage levels as "low". Many local community members interviewed for the research said they had not seen the land lease agreement, and felt the company had not kept promises to them.
Responding in an open letter, Addax Bioenergy refuted the claims and said it had not been given the chance to contribute to the research.
It stressed that malnutrition has long been a problem in the area, and to that end it has created a Farmer Development Programme to improve food security, under which it has prepared around 2,000 hectares of community fields for 39 communities. The project will create 2,000 jobs when fully operational next year, it added.
"Addax Bioenergy is fully aware of the debate around land-related investments in Africa and is committed to demonstrate that private investment can lead to a virtuous circle of responsible and sustainable development," wrote Simon Cleasby, its chief executive officer.