KenGen’s geothermal deals in Ethiopia good for Kenya

My article in this column last week was on how Kenyan firms with oil and gas experience and capacity can venture into the fast growing natural gas developments in Mozambique. This is what Kengen, the Kenyan power generating firm, has done in Ethiopia where the company is “exporting” its geothermal technical capacity gained over years.

And this is indeed a good story because, firstly it proves that Kenya has sufficiently matured its geothermal technical “local content” to international standards. And secondly because Kengen will earn foreign exchange for Kenya while providing external contracting exposure to its employees.

I chanced on this story in December last year when I passed a long and well controlled convoy of Kengen trucks carrying heavy equipment which I was informed was heading north to Ethiopia.

KenGen, an acknowledged pioneer in geothermal generation in Africa, was awarded two geothermal drilling projects in Ethiopia after competitively winning international tenders, which is a proof that the company has made the mark, and that it can compete for similar jobs elsewhere in Africa, especially in those counties that accommodate the Rift Valley and areas with volcanic geology.

The first of the two geothermal contracts in Ethiopia was awarded to Kengen and its consortium partners by Ethiopian Electric Power (EEP) for the supply of geothermal drilling rigs and accessories, as well as operation, and maintenance of the Aluto Langano Geothermal Plant which is on the Ethiopian Rift Valley about 200km south of Addis Ababa. The project targets production of 75 MW of geothermal electricity with a contract value of $6.0 million and is expected to take one year to complete.

The second Ethiopian contract for KenGen was awarded by a private company, Tulu Moye Geothermal Operations PLC (TMGO) to drill 12 wells, also located in the Ethiopian Rift Valley. The project contract is worth $ 57 million and targets an initial 50MW of power generation. The contract duration is two and half years.

My key interest in this subject is to emphasize the missed opportunity by Kenyan indigenous construction contractors to nurture their local content (technology, expertise and capacity ) to firstly be able to undertake major local projects, and secondly to step out and bid for contracts outside Kenya, the way KenGen is doing in Ethiopia.

Unfortunately our public procurement laws are not flexible enough to accommodate a bias to proactively and affirmatively assist in developing Kenyan technical local content.

With a “perceived” preference for mainly Chinese contractors over the past 15 years, Kenya has not only weakened its technical contracting capacity, but has also missed out on potential participation in regional construction contracts. This is a predicament that deserves a high level of political attention and resolution…

My other appeal is that geothermal power should be clearly prioritised in the generation mix. With the abundance of geothermal resource, and ready technical capacity to develop it, geothermal should be on top of our generation mix as a matter of accepted policy and priority. We should not be planning any energy projects that are based on “imported” energy inputs (coal, fuel oil, natural gas or LNG).

Geothermal readily attracts project funding from global multilateral investment institutions and private equity, due mainly to its good ranking in carbon footprint hierarchy. As an “indigenous” energy resource it adds direct value to the economy. It is a preferred base-load electricity supply for stabilising the grid during peak demand, and a back-up for the other seasonal and intermittent renewable energy sources ( hydro, wind and solar ) .

Finally, KenGen should serve as an effective example of how to nurture professional and technical skills for application in Kenya and outside. Geothermal drilling skills are indeed transferrable to other related sectors like oil and gas exploration and development.

On its part the government should align its policies, laws and regulations to effectively support creation and nurturing of technical local content in all economic sectors, and to ensure that local companies are supported to undertake local projects.