At the end of October, the last of 365 turbines at the Lake Turkana Wind Power (LTWP) Project was fully commissioned and plugged into the national grid, marking the completion of this enormous project that remains Kenya’s largest ever single private investment. Full construction of the 310MW capacity wind farm was completed by mid-July 2017, however the company had been unable to generate and evacuate power due to ongoing delays to the construction of a 428 km transmission line connecting the project to the grid. The transmission line was finally energised on September 24th, providing the greenlight for LTWP to begin connecting the turbines to the grid. This moment, long in the waiting, resembled a major milestone in the life of this project that is now officially Africa’s largest operational wind farm.
A challenging period
Nonetheless, the delayed construction of the transmission line created a difficult situation between the company on one hand and the national distribution utility Kenya Power and Lighting Company (KPLC) and the Government of Kenya (GoK) on the other.
The difficulties concerned the ‘take-or-pay’ principles contained in the 20-year power purchase agreement (PPA) whereby all risks pertaining to a transmission interconnector (TI) delay were not to be borne by LTWP.
Consequently, LTWP lodged its claim to some GOK TI Delay Deemed Generated Energy (DGE) payments in order to meet its repayment obligations under the complex project financing arrangements.
Amendments were eventually made to the PPA whereby a partial sum (€46 million) of the payment was paid in order for LTWP to repay its September 2017 and March 2018 semi-annual debt instalments, which amounted to just over €74 million in total – a significant sum by any estimation.
The balance of €81 million was deferred for repayment over 6-years by way of a minor tariff increase of €0.00845 euros per kWh.
LTWP’s project finance advisor and director Rizwan Fazal describes the period between July 2017 and September as a very awkward and antagonistic time from a government relations, lenders and general population perspective.
LTWP’s claim to GOK TI Delay DGE Payments – even though it was a negotiated settlement, was seen and perceived negatively by the electricity consumers who were grappling with increased power bills and would eventually be shouldering the cost of the TI delay.
The GOK was a stellar party and clearly understood the need for and importance of honouring the payment obligation. Eventually, it was a win-win for all parties. The GOK set itself apart as a most credible counterpart, says Fazal.
“It has been difficult for the shareholders of the company, who have lost nearly 18 months’ worth of revenues. But from every perspective there is now great relief that the transmission line has been built, hot commissioning has taken place and power is being fed into the grid. It feels great.”
During the long hiatus, the company had to enter into service agreements with its turbine supplier, which essentially acted as preservation contracts up until the point when the transmission line was in place and hot commissioning could occur – meaning tests that require a live connection.
In addition, when it was finally able to feed power into the grid, LTWP was confronted with moving goalposts in Kenya’s energy network; several new generating plants had come online since January 2014 – when the company first undertook load and system studies.
In addition, some transmission infrastructure that was anticipated had not materialised. These changing parameters contributed to system challenges both to and from LTWP.
“However, one pleasant surprise has been the ability of the plant to surpass our expectations in terms of output. We have had capacity factors that are North of 90% on a fair number of occasions already,” Fazal reports.
Beating capacity expectations
The company previously anticipated that the wind farm would operate at an average of 62% of its total 310MW installed capacity, so to be achieving an average of over 70% consistently so far is a great result for LTWP.
It has always been known that the location of the wind farm, nestled between two vast mountain ranges in Kenya’s far North, would provide some of the best conditions in the world for generating wind energy.
Detailed mast measurements consistently indicated that this was an area of constant, uni-directional wind at high velocities. But much of this understanding was purely theoretical, so to see the wind farm outperforming its target capacity on a regular basis is a very welcome return for LTWP.
“If you take the period from September 24th – October 27th, we recorded an average capacity factor of 80%. This corresponds to around 14.5 metres per second average on the power curve. That is phenomenal when you compare it to other wind farms around Africa and across the world.”
Staying in Kenya, the wind farms located in the Ngong hills near the capital city of Nairobi perform at around 37% capacity, according to Fazal. In South Africa, wind farms hover between 45-50% on average, and the UK’s entire wind sector performs at 28-35% of its total capacity.
“Lake Turkana is blessed with quite a phenomenal resource and it will come into play quite nicely as the energy is baseload and very predictable,” Fazal believes.
While the distinctive configuration of the land in the area makes it highly conducive for generating wind energy, LTWP and its construction partners can be forgiven for highlighting the major challenges posed by the project’s remote location.
The project sits at the Southern tip of Lake Turkana in Loiyangalani sub-County, Marsabit County region, and is far removed from Kenya’s bustling urban centres – approximately 750 km away from capital city Nairobi and just under 1,200 km from major port city Mombasa.
The cradle of mankind
The Lake Turkana region, which is best known for being ‘the cradle of mankind’ – after a number of important archaeological finds – is sparsely populated and home to only a small nomadic population. As such, the area had virtually nothing in the way of infrastructural development prior to LTWP commencing work on the project.
Therefore, the first task of the construction phase was to build 208 km of public road just to provide access to the site. Next, 130 km of road was laid within the wind farm, along with 180 km of overhead lines within the 33KV network.
The 365 turbines had five different foundation designs each with around 57 cubic metres of casting and were spaced across 40,000 acres at the project site, which was an 18-hour truck drive away from Mombasa – where the turbines and a large number of equipment had to be transported from.
However, LTWP and its partners worked miraculously over the 30-month construction period to overcome these obstacles, creating a highly efficient supply and logistics chain that allowed the project to be completed on time and on budget.
“We had anticipated completing on January 26th, 2017 and we were ready with the first unit group of 119 turbines on January 27th. We were absolutely on budget, not a penny above during the entire construction period, which in itself was quite a miracle for a project of this scale.
“It all comes down to people, teams, the partners and efficient project management. Across the board, the teamwork between LTWP and the EPC contractors – Vestas, Siemens, RXPE of China, Civicon and Southern Engineering Company of Kenya (Seco) was miraculous.”
Despite facing initial challenges around seeking labour during the construction phase (primarily due to the inhospitable nature of the location) there was a big push towards local employment by LTWP, who ensured that the contractors were flexible with regards to incorporating local labour into their teams.
Behind this local employment push was the company’s ambition to develop the local area by enhancing skills and transferring knowledge, in the hope that this would have a domino effect post-construction in terms of developing vocational businesses and industries.
“At the peak we had 1,254 employees in the company, of which approximately 800 were local from the area. Most of the balance were from Kenya with around 10% being foreigners or expatriates.
“There was a lot of knowledge transfer, and today LTWP has employed a lot of those workers who were trained by the contractors, including Vestas, Siemens and Seco, into full time roles at LTWP.”
Winds of Change
This community-driven mindset at LTWP has been further crystalized through the formation of the Winds of Change Foundation (WoC). Established in 2015, WoC is a 100% LTWP-owned subsidiary that implements LTWP’s CSR programmes and aims to improve local livelihoods within the 20,000 km² catchment area of the wind farm.
The foundation focuses on enhancing employability and improving access to healthcare and water, with a key feature of its work so far being the ability to deploy the services of former LTWP employees in community projects.
“When we wish to build a water facility or any other project, we are finding that lots of those previous employees of project partners are being awarded those contracts and are able to now supplement their income through our outreach projects.”
The projects started with fairly simple bore hole exercises for water storage, but WoC’s scope of work has gone on to include constructing dispensaries, schools, laboratories, IT centres and vocational training centres.
One of the standout projects has been the conversion of a youth centre to an IT centre in the town of Korr, Marsabit County. Prior to the conversion, residents would have to travel 300 km just to complete exercises as simple as sending or printing electric documents.
“Now, residents can access an IT facility from the heart of their community. This IT centre also demonstrates the public-private partnership nature and the coming together of multiple parties including WoC and investors, working in close cooperation with Marsabit County Government.
“Even in its infancy, WoC has been successful in being a catalyst towards sustainable development. This is something we want to continue as we now start to generate power and have put aside a substantial allocation of revenues towards the CSR programmes undertaken by WoC.”
A litmus test
The LTWP project can be viewed as a litmus test for whether Kenya and other sub-Saharan African countries are ready for clean energy infrastructure projects of a comparable scale. For Fazal, the proof is in the pudding at Lake Turkana.
“Lake Turkana was able to rely on all of its contractual obligations, including the rule of law. It demonstrated that from a logistical perspective, large-scale projects can be implemented in remote parts of Africa. The fact that it was done on time and on budget is proof that well-structured, well-implemented projects are key.
“Kenya has proven it is not an island and is part of this wider financial and global market. People can look to Kenya with confidence that their investments will be protected and that contracts will be honoured, even under the most strenuous circumstances.
“But there are lessons to be learned. Lake Turkana’s implementation has been by no means easy. We have had our fair share of pain, but on the whole the success of Lake Turkana will be replicated and will inspire others to develop projects in the country and in the region.”
However, Fazal makes a stark warning against the wholesale adoption of renewables in Kenya, believing that renewable energy projects should be introduced in a tapered manner to prevent energy supply rapidly outstripping demand, which would send energy prices higher for consumers.
Secondly, the wholesale adoption of intermittent renewable energy would need to be accompanied by upgrades to the network to prevent voltage instability, which has already occurred after the introduction of power from LTWP.
“I think for investors the focus is going to move towards the technical and regulatory aspects of these projects and those areas need a lot more planning and a coordinated approach.”