Energy Firm with Assets in Uganda to build 80- megawatt power plant

Gulf Energy Ltd., a Kenyan gas- station operator and fuel importer, plans to build an 80- megawatt power plant fed by heavy fuel oil from July as electricity use grows at about 14 percent a year in East Africa’s largest economy.

The site in Athi River, 25 kilometers (16 miles) southeast of Nairobi, is due to be completed by July 2013, Abubakar Ali, chief financial officer of Gulf Power Ltd., a subsidiary of Gulf Energy, said in an interview today in Nairobi. Gulf Energy entered a 20-year power purchase agreement last year with Kenya Power Ltd. (KPLL), the sole electricity distributor, Ali said.

Demand is expected to reach 16,905 megawatts by 2031 from 1,520 megawatts in 2012, the Energy Regulatory Commission says. Gulf Energy was the biggest private importer of fuel products by volume in 2010 and 2011 in Kenya, which has no oil or gas reserves of its own in commercial production, Ali said.

The company, which has assets of $30 million and generates about $1.5 billion in annual revenue, also operates in Uganda and Rwanda, and plans to expand into Tanzania this year followed by Zambia and the east of Democratic Republic of Congo, he said.

About three-quarters of the 80 million-euro project will be debt-financed. International Finance Corp., a unit of the World Bank, the OPEC Fund for International Development and Standard Bank Group Ltd. are each lending 20 million euros ($26 million).

Gulf Energy will raise the same in equity with a partner, Ali said, declining to name the company as talks continue.

Risk Guarantee
The World Bank is providing a partial risk guarantee in support of the project, he said. The site will be developed on a build-own-operate contract for 20 years, according to the IFC.

The company also plans to open its newly built, $12 million storage facility with capacity to hold 3 million liters (790,000 gallons) of petroleum products and 450 metric tons of gas stocks in Nairobi in the second-half of this year, Ali said.

Gulf Energy is in talks with IFC on plans to sell liquefied petroleum gas in units of as low as 200 grams (7 ounces), making it easier to offer to low earners, he said. The World Bank estimates 45 percent of Kenyans live on $1.25 a day or less.

“We have a lot people using charcoal and kerosene because they can’t afford the equipment and to buy gas in 6-kilogram and 13-kilogram” canisters, Ali said. “This would be affordable.”

Bloomberg
22-May-2012