Page 5 - AsiaElec Week 46

AsiaElec COMMENTARY AsiaElec
Transport (LAPSSET), itself a key plank of the BRI in Africa.
Meanwhile, the Kenyan government is sup- porting LAPSSET in a bid to drive industrialisa- tion in its northern coastal regions.
On the other hand, there are fears that the project could lock Kenya in to decades of high energy costs and loan repayments to Chinese banks, exposing the country to Chinese eco- nomic and even political pressure.
The projects calls for a power purchase agree- ment (PPA) with state-run utility Kenya Power that would require $360mn per year of fixed-ca- pacity payments.
There is also concern about generating costs. Although Amu Power has claimed it can produce power at US$0.072 per kWh, a recent report from the US-based Institute for Energy Economics and Financial Analysis found this figure to be “highly optimistic.”
The institute warned that higher coal coasts could push the price of power to $0.22-$0.75 per kWh.
Other options for Kenya include renewables. The country expanded its green capacity by 22% in 2018, according to the IEEFA, with the open- ing of the 310-MW Lake Turkana wind farm.
The 100-MW Kipeto wind farm also recently reached financial closure.
Solar is also making progress, with the AfDB recently having financed the utility-scale 40-MW Kopere solar project.
Meanwhile, Globeleq announced in June that
it had reached financial closure for the $69m, 40-MW Malindi solar project, the country’s first IPP utility-scale solar scheme.
Exit from coal
The bank’s decision to exit coal follows those by major banks, insurers and DFIs, which are also reining in their exposure to the fuel.
Investors now factor in a project’s emissions profile when considering backing a project, and include environmental, social and corporate (ESG) governance risks when predicting a pro- ject’s future performance.
For the AfDB, the exit from new coal con- trasts with its recent support for the Medupi coal plant in South Africa, which received $1.65bn in loans from the bank, and the Sendou coal-to- power project in Senegal, which received €50mn of soft loans.
Current finance commitments include flue gas desulphurisation technology at Medupi in a bid to reduce emissions.
Nevertheless, the AfDB’s Adesina has repeat- edly said that the bank’s future energy invest- ment strategy will focus on green energy. With its exit from Lamu, the bank is at least in part following that strategy.
Given Chinese interests, Lamu is unlikely to die any time soon, and more legal action is to be expected. Beijing will play a long game, and sees the export of Asian coal to fuel Chinese-backed industrialisation as a key way to improve its eco- nomic and political position in Africa. ™
Protests against Lamu
Week 46 20•November•2019 w w w . N E W S B A S E . c o m
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