The multi-well exploration risk cover is being provided for the Kenyan Akiira project, developed by Akiira Geothermal Limited (AGL). Munich Re is engaging in a series of up to eight drillings, making the project’s financing more dependable and easier to schedule. The premiums become due in instalments as the drillings progress. Possible measures to stimulate or increase output by deepening the wells, or through sidetracks, are also part of the insurance package. Thomas Blunck, a member of Munich Re’s Board of Management, said: “The Kenyan geothermal project will harness a form of renewable energy where it is most promising and urgently needed. The multi-well concept provides flexibility and security to the developer and the investors.”
With its new portfolio concept, Munich Re is covering risk on a series of eight wells in a region in Kenya that is characterised by so-called high enthalpy, i.e. especially high subground temperatures. The exploration risk insurance covers the risk of insufficient output due to lack of geothermal resources, and is quite often a prerequisite for the financing of geothermal projects.
The Akiira project will be Munich Re’s first geothermal insurance project in Africa. It is the first privately owned geothermal project in Kenya to be developed in many years. The drillings are located in the East African Rift System, around 100 kilometres from the capital Nairobi and near the Olkaria Field, where about 500 MW in geothermal facilities are already in operation. The region is characterised by a significant graben (Great Rift Valley) with strong geological activities and therefore has much geothermal potential. High-enthalpy regions are in fractures in the Earth’s crust (as in Kenya), broken tectonic plates, or in active or formerly active volcanic regions. The heat in such regions is often already to be found at relatively shallow depths of 1,500 to 2,500 metres.
Countries like Kenya need new reliable and affordable sources of energy for their fast growing economies, and to give people access to electricity on a larger scale. Hezy Ram, CEO of Ram Energy, Inc, one of the founding shareholders of AGL, states: “Geothermal heat offers an immense reservoir of base load energy. Akiira will be a pilot project for us, so that other projects can follow.” Geothermal projects are often difficult to finance. The early drilling phase is the most difficult one for contractors and investors: if the targeted geothermal reservoir is unable to produce enough output in steam or heat, the project is usually discontinued and the investment lost. Munich Re now covers such resource risks with its Multi-Well Exploration Risk insurance, thereby helping ambitious projects be realised.
AGL is jointly owned by Centum Investments Company Limited, Frontier Investments Management and development partners Marine Power Generation Limited (MPG) and Ram Energy Inc. (REI). While MPG is holding the geothermal license, US-based REI has employees with significant geothermal and power plant development and project financing experience.