Kenyan taxpayers will be forced to pay more than sh 900 billion for 25 years should the Lamu plant be constructed, a report released on Monday by the Institute for Energy Economics and Financial Analysis (IEEFA) has said.
The report, The Proposed Lamu Coal Plant: The Wrong Choice for Kenya, examines how the Lamu project was intended to replace the country’s aging diesel-fired generation and strengthen baseload capacity but factors, such as lower-than-projected demand and higher costs for imported coal, have rendered the plan obsolete.
The plant is being built by Amu Power Company Limited, a single-purpose entity, 51 percent owned by Centum Investments, a Kenyan investment firm, with the remainder held by Gulf Energy.
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According to the report, the three-unit, 981-megawatt (MW) facility, would lock the country into a 25-year deal at a cost to consumers of more than US$9 billion, even if the plant never generates any power.
“The existing 25-year PPA would force Kenya to pay at least $360 million in annual capacity charges, even if no power is generated at the plant.” Reads part of the report.
The report further alleges that Amu power deflated production costs by using outdated coal prices and inflated the projected production capacity for the plant by more than 10 times thereby using cooked figures as a selling point.
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“This project would lead to excess generating capacity in Kenya and sharply increase electricity rates for consumers,” said IEEFA director of resource planning analysis David Schlissel, who wrote the report. “The original assumptions that justified the project, no longer apply.”
First proposed in 2015, the Lamu plant is scheduled to enter commercial service in 2024 at an initial cost of US$2 billion.
The construction contract for the plant was awarded to Power Construction Corporation of China in 2016.
The report further warns that the plant would slow the development of readily available, clean and increasingly low-cost geothermal, wind and solar resources.
“Building this facility would burden consumers with costly power for years to come,” said Schlissel. “In addition, the project would make it difficult, if not impossible, for Kenya to meet its obligations under the Paris Agreement on climate change.”