01 Feb 2023

Kengen Secures First-Refusal Rights on Gdc Geothermal Wells

01 Feb 2023  by   

Geothermal well at Menengai, Kenya (source: flickr/ ScientificDrilling)

KenGen has signed a memorandum of understanding (MOU) with the Geothermal Development Company (GDC) that gives KenGen first-refusal rights for the offtake of GDC’s new and existing geothermal wells. This puts KenGen at a prime position to build power plants or direct use facilities that will utilize the steam from the wells of GDC.

The first-refusal rights also means that GDC can only offer the steam from the wells to other independent power if KenGen confirms that they will not bid for the steam.

“Indeed the relation with GDC in terms of our right of refusal is there and it exists. There is a meeting which has been convened by the Principal Secretary [Alex Wachira] between GDC and ourselves to discuss ways of working together in terms of exploiting some of the steam that GDC has drilled,” said KenGen Managing Director Abraham Serem.

GDC already supplies steam from their wells to generate power in KenGen’s Olkaria I Additional Units IV and V, Olkaria IV, and wellhead plants. KenGen has been spending between Sh2.7 billion and Sh 3.5 billion (approx. USD 21.7 million to 28.1 million) every year since 2015 to purchase steam from GDC.

Meanwhile, GDC continues to drill prospecting wells at the Menengai and Baringo-Silali sites. For the Menengai field, GDC had already entered build-own-operate contracts with three independent power producers – Sosian Energy, OrPower 22, and Quantum Power – with a first phase target of 105 MW capacity. However, financing issues have hampered the development in this area.

In December 2022, UK investment firm Globeleq reported securing a financing agreement for USD 72 million for debt funding of the Menengai geothermal project. Globeleq holds a majority stake in Quantum Power. OrPower 22 had also reported securing funding of USD 97 million earlier this month for the construction of their power plant in Menengai.

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