WASHINGTON, D.C., May 5, 2000—
The International Finance Corporation has signed agreements to invest up to US$41 million in the Kipevu II power project—the first private power project in Kenya to be financed on a non-recourse project finance basis.
The $86 million project will build a 74 megawatt diesel engine generation plant in Mombasa, Kenya's main seaport and second largest city. The output will be sold to Kenya Power & Lighting Company Ltd. (KPLC), the national publicly listed electricity utility, through a 20-year power purchase agreement.
Kenya has an acute shortage of power, and Kipevu will provide a much needed stable source of electricity that will contribute to economic growth. The Executive Vice President of IFC, Peter Woicke, who signed the agreements, said that Kipevu has already accelerated the pace of development of other private power plants and will no doubt foster further private infrastructure projects in Kenya. Mr. Woicke also stressed that private sector financing of Kipevu would enable the Government of Kenya to conserve limited public resources for other priorities, such as education and healthcare.
The project was awarded on a build-own-operate basis to lead developer Wartsila NSD Power Development through an international competitive bidding process. Wartsila, one of the world's leading manufacturers of diesel engines for stationary and marine uses, will retain 15.1 percent ownership in the project company.
Cinergy Global Power Ltd. (CGP) and Industrial Promotion Services (Kenya) Ltd. (IPS-K) will be the lead shareholder with 49.9 percent ownership through a 50-50 joint venture holding company. CGP is a subsidiary of Cinergy Corporation of Cincinnati, a US-based electricity utility. IPS-K is a multi-sector investment and management company controlled by the Aga Khan Fund for Economic Development (AKFED) of Switzerland. IFC has a 15 percent shareholding in IPS-K, and they have frequently worked together in Africa. The CDC Group plc (CDC), the British bilateral development agency, will have 30 percent ownership.
IFC's financing consists of an equity investment of up to $1.05 million, a subordinated loan of up to $1.4 million, and a loan of up to $15.1 million for IFC's own account. In addition, IFC was instrumental in arranging syndicated loans of up to $23.5 million for the account of participants – the first such loan in Kenya in more than a decade. The new facility will also allow KPLC to diversify its power sources and reduce hydrological risk.
IFC has advised the Government of Kenya and KPLC on sector reform, alongside the World Bank's work in helping to restructure the energy sector. In addition, IFC's involvement has built in strong environmental and social standards for the project, in conformity with the World Bank Group's policies and guidelines.
The mission of IFC, part of the World Bank Group, is to promote private sector investment in developing countries which will reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, and provides technical assistance and advice to governments and businesses.
