Akiira Geothermal Ltd, a consortium developing geothermal power, plans to double its exploration wells by year-end at a cost of Sh1.4 billion as part of its plans to generate 70 megawatts (MW) of steam power in two years.
Drilling of two more wells will start in June in Akiira Valley in Naivasha steam fields.
The project last month received a Sh138 million grant from the African Union Commission.
Investment firm Centum, which is listed on Nairobi Securities Exchange, has 37.5 per cent equity in the Sh30 billion project.
“Exploration drilling of the first well will start early June to be possibly followed by a second one at a total cost of $14 million (Sh1.4 billion),” said Robert Bunyi, the outgoing chief executive of Akiira.
A steam well takes about 60 days to drill, reaching depths of up to 3.5 kilometres. The geothermal project is expected to inject 70MW to the grid in the next 18 months, or end of next year.
The electricity will cost Sh9.3 per unit (9.23 US cents).
Akiira was to start power generation by December but suffered delays after exploration of its first two wells yielded less steam, prompting further drilling and tests.
The company started exploration in August last year, targeting to drill up to 15 steam wells, each with an average capacity of 5MW, bringing the expected installed capacity to about 75MW.
Mr Bunyi said that project financing is through a mix of debt (70 per cent) and equity (30 per cent), meaning the Centum consortium will contribute about Sh9 billion out of the required Sh30 billion.
The project is partly funded by US President Barack Obama’s Power Africa initiative that aims to light up the continent by tapping into renewable energy.
It received a $1 million (Sh101 million) grant two years ago from the US-based Overseas Private Investment Corporation (OPIC) to meet its technical and legal expenses.
The company last August signed a power purchase agreement (PPA) with electricity distributor Kenya Power indicating December 2016 as the generation date for the 70MW. It will not meet the deadline.
Mr Bunyi said the PPA allows for a change of date for power generation, depending on the availability and viability of steam.
Under the 25-year PPA, Kenya Power will buy electricity from Akiira at Sh9.3 per unit (9.23 US cents), which is about half the current cost of thermal power, for onward sales to homes and businesses.
Kenya is going heavy on renewable energy like geothermal, wind and solar to grow its installed power capacity from current 2,294 MW.
Akiira Ltd is owned by four shareholders including Frontier Investment Management, a Danish private equity company and Centum.
Others are Marine Power Generation of Kenya and US-based RAM Energy, in charge of construction.
The project last year secured a risk cover from German re-insurer, Munich Re, to compensate investors in case the eight geothermal wells being drilled in the steam fields do not produce enough power.
At Sh9.3 per unit, Akiira’s geothermal electricity cost is slightly higher than what Kenya Electricity Generating Company (KenGen) sells to Kenya Power.
KenGen sells its geothermal energy at Sh7 per unit and hydropower at Sh3 per unit — the cheapest source. Thermal generators are the most expensive at Sh18.