Tuesday, 26 June 2012

Kenya to host Konza technocity's investors conference

The technology Park will be a prominent feature in the city
 THE KENYA GOVERNMENT  will host the first Konza city investors conference in August. The event will bring together 500 local and international investors in a three- day conference to discuss among others, the financing models of the city. Also to be discussed will be best practice cases.

Konza Techno City aims to catapult Kenya into an ICT giant by 2030. It will place Kenya firmly on the competition seat with such global BPO, KPO and ITO giants as India and China. Dubbed the  silicon Savannah of Africa, Konza ICT City is a green field project that will be home of Africa's Computerisation drive–something similar to Silicon Valley in the US.

The CBD: an impressive Skyline in the Middle of Savannah
 The 20-year project will be developed in four five-year phases for a total estimated cost of US$7 billion. The first phase will cost an estimated US$2.3 billion of which infrastructure will cost US$1 billion. The rest will be spent on the development broken under: the ICT Park US$200 million, Residential US$975 million and the Central Business District will cost US$125 million. Each phase will last five years.

The second phase will cost an estimated US$1.7 billion of which infrastructure will cost $400million; the residential area will cost US$850 million while the CBD will cost another $100 million while the BPO will take another $300 million. The university, which shall be built at this stage, will cost some $50 million.

The third phase will cost an estimated $2.1 billion of which infrastructure will consume $600 million. The BPO will cost another $400million, CBD $300 million, Science Park $100Million and Residential $700 million.

In the final phase, BPO will cost $450 million, residential $250 million, Science park $100million while infrastructure will cost $150 million, says an analysis posted on their website, www.konzacity.co.ke. At the end of it all, infrastructure will swallow an estimated $2.1 billion while other developed will cost some $4.8 billion.

 According to the same posting, there will be no land for sale to individuals. Instead, a Master Developer will construct the structures and lease them to investors. The aim is to eliminate speculators who could hoard the land and delay the development of the city.

There are three options to developing the city
  • Single Private Master Developer undertakes the master planning of the entire property under Master Development Agreement and finances its development directly or through sub-developers. Government finances backbone infrastructure fully or partially.
  • Government Authority finances backbone infrastructure and undertakes the master planning of the property, including attracting developers for specific land uses.
  • Government contributes land to a Special Purpose Vehicle (SPV) to be established jointly with Private Master Developer.

These are the issues expected to be thrashed out at the investor conference in slightly over one month. According to the same posting, the return on leasing ranges between 12 and 15 per cent while capital gains rate is estimated at 20 per cent.

The Konza Techno city is located 60 KMs south west of Nairobi in Makueni County. It is connected to Nairobi by Mombasa Road and served by three high speed fibre optic networks. A high speed Railway link to Jomo Kenya international Airport, is also in the works.
 (Read http://eaers.blogspot.com/2012/02/kenya-rearing-to-launch-ict-city.html
For updates on this story please visit: http://eaers.blogspot.com/2012/09/konza-techno-city-begins-in-october.html

Wednesday, 20 June 2012

Kenya to concession geothermal power generation

A geothermal Plant at Ol Karia in kenya

KENYA, AFRICA'S geothermal power giant, has changed its business model to speed up geothermal power generation. The new model involves un bundling the drilling function from the generation function. Drilling will remain in the hands of the government, while generation will be in the hands of the private sector.

The new model is working well and is expected to add an additional 400MW into the national grid come July 2016.  The government has created a company to take over the drilling function. Geothermal Development Corporation, GDC, plans to develop some 3000MW by 2020 rising to 5500MW in 2031, an appraisal report seen by this publication, says.

GDC’s will develop the steam wells and install the wellheads and then concession the wells to power producers who shall build, operate and maintain generating stations. The generators will sign PPAs with the power distributor in the country. KPLC. Previously both the drilling and the power generating functions were rolled into one. This made it impossible to attract the private sector into the geothermal power sub-sector.
The new model will start at the Menengai Geothermal development Project whose first phase is currently under development. It will produce some 400MW-an estimated 26 per cent of the current national supply, by 2016 at a cost of US$502 million. 

An Hydropower dam :a diminishing resource 
The Kenya government will pick the Lion’s share of this tab at US$245 million. African Development Bank is second with a significant US$147 million while the rest will be funded by other donors including AFD, the French international co-operation agency and the European investment bank.

So far 19 IPPs have submitted bids for a concession to generate power from Menengai wells. Among the bidders is Kenya’s leading electricity generator, KenGen and a local investment firm, Centum investments. GDC will award the concession to four bidders.
The concessions, according to GDC, will be awarded subject to fulfillment of certain conditions. One of the conditions is they produce and sale power to Kenya at Kshs 6 (US$.0.070) per KWh, which is 50 per cent below the current cost.

The second phase will generate 800 MW at a cost of US$800 million. This phase will commence soon after Phase One. Reports indicate that AfDB is considering a proposal to finance part of the cost. There are indications that the bank will approve the proposal, informed sources say. In total Menengai steam wells are expected to produce an additional 1200MW of geothermal power by 2020 rising to more than 5000MW by 2030.

The creation of GDC to develop steam wells followed disappointment with the BOT model of PPP in drilling and steam well development. While the country was in a hurry to develop geothermal energy, the private sector’s delivery was very slow and frustrating. The only active operation Ol Karia IV, being developed by Or power will add only 52MW to the grid.

Investors are not ready to accept the drilling risk but are prepared to take the power generating risk says a report by African development Bank document seen by this publication. The Kenya government, says the AfDB report, had issued three licenses for steam well drilling between 2007 and 2009 but is now considering cancelling them since there has been no movement on the license for more than three years.

GDC was thus born to mitigate the drilling risk. Kenya has the potential for 10000MW of geothermal power. The country is in a hurry to develop geothermal sources of electric energy as other sources are no longer reliable.

Currently, hydro is the leading source generating a 766.88MW which forms 65 per cent of the KenGen’s installed capacity. KenGen is the power generating utility. Kenya’s generating capacity of 1400MW serves only 14 per cent of the Population. And the power is expensive.

Apart from GDC’s programme, the power generating company, KenGen, also has its own expansion programme which ends in 2016. The company plans to increase its power generating capacity by an additional 1832 MW by 2016.  Of these, Hydro will generate an additional only 53MW while wind power will generate an additional 56.8 MW, geothermal will generate an additional 732MW over the same period from its Ol-karia wells.

Geothermal energy is the natural heat stored within the earth’s crust. The energy is manifested on the earth’s surface in the form of fumaroles, hot springs and hot and altered grounds. To extract this energy, wells are drilled to tap steam and water at high temperatures (250-350°C) and pressures (600-1200 PSI) at depths of 1-3 km. For electricity generation, the steam is piped to a turbine, which rotates a generator to produce electrical energy.

Kenya is the leader in geothermal power generation in Africa having built its first geothermal power in early 1980s. It now generates some 150MW from two geothermal plants. The first plant was the Olkaria I Power Station which was also the first in Africa. The 45 MW plant was commissioned in three phases and has three units each generating 15MW. The first unit was commissioned in June 1981, the second and third units in November 1982 and March 1985.

Olkaria II Power Station, Africa’s largest Geothermal Power Station to date was built in the year 2000 and generates 70MW. It is the second geothermal plant owned and operated by KenGen. The second phase of Olkaria II was commissioned in 2010 injecting an extra 35 MW of power making a total of 150MW of power generated by geothermal means.

Thursday, 7 June 2012

Raila Odinga: Is he fit to be Kenya's President?

Crystaballs depict him as a
 weak and incompetent President

 AS KENYA trudges on towards the next general elections, it is time to define our expectations of the next president. So far all activity is centered on  side-shows such as:  How to avoid violence come the next elections and how to create national unity. Peace is important in this country, but we also know violence is incited by politicians unwilling to cede power. My take on this is; with four Kenyans facing charges at the ICC over political violence, chances are nil that anyone would dare incite violence. That is therefore a side show.

The real issues are bread and butter issues and that is what this series hopes to bring into focus. This series will examine   a candidate’s suitability on the basis of four, nay five criteria, mainly bread and butter issues.
These are development policy, trade policy, Foreign Policy and his stand on integrity and respect for governance institutions. Where possible we shall provide evidence of a candidate’s competence or lack of it.

 Kenya’s development agenda is more or less cast in stone over the next 18 years or so. It is defined in the country’s vision 2030- the national long-term development blue-print. It aims to transform Kenya into a newly industrializing, middle-income country providing a high quality of life to all its citizens by 2030.

Vision 2030 calls for deeper economic diversification and widening of the domestic and regional markets through construction of infrastructure in transport and energy sectors.  It also proposes to construct an ICT City and five resort cities to diversify the tourism products and destinations. We are talking about creating jobs here, lots of jobs. We doubt whether any presidential candidate would want to tinker with this blue-print.

However, the supporting cast such as Foreign Policy, trade policy, integrity and respect for institutions of good governance can be tinkered with. We shall evaluate a candidate on the basis of the supporting cast.We shall evaluate the five or so top contenders for Kenya’s Presidency  starting with the current Prime minister, Raila Odinga, who claims to be the most population of the pack.

We begin with the foreign policy. Productive foreign policy must be accompanied by among others, economic gains. Kenya’s foreign policy was for many years- pro-west. In the recent past, this policy has proven an economic disaster forcing a shift to the East.

The shift to the East has paid dividends in the recent past with a flurry of investment in roads construction by the Chinese. We have also noted increased Japanese activity in the same sector, meaning that Japan is feeling the heat of the Chinese presence in Kenya.

Raila Himself appears to be a darling of the West, particularly the US and the UK. But the two giants are already on their knees steeped as they are, in economic crisis of their own. There does not appear to be an end to the crisis anytime soon. In fact since the 2001 dot com melt down, the West has been stumbling from one crisis to the next in a short span of time. So a shift of foreign policy to the West would take Kenya back to the era of shifting goal- posts. 

 That was the time when fulfillment of one condition for aid- led to another condition but no funds. Now we know that the West was broke and was too proud to admit it. Recently David Cameron, the UK prime Minister, rubbed Africans the wrong way when he suggested that Aid will be tied to respect for gay rights, a taboo subject in Africa.

In May this year President Obama of the US came out strongly for gay rights in the US. Would a Raila Presidency shift the country’s foreign policy towards the West? Would the shift be of any benefit to this country? The answer to the latter question is an emphatic NO.

Trade Policy is closely tied to foreign Policy. The trend now is for the foresighted leaders to forge close trade links with the emerging markets. In Africa, the trend is increasing intra-Africa trade, which is also foreign policy. Would a Raila Presidency support or stifle the growth in intra-Africa trade?

Uganda is the leading market for Kenyan exports in the world.  Last year, 2011, she absorbed US$904 Million worth of Kenyan exports, way ahead of UK-US duo which, combined absorbed only $862 million.  Four years ago, Uganda, for unknown reasons, occupied a piece of rock measuring about one acre in Lake Victoria. The rock called Migingo, provoked an outcry from the PM supporters that we feared a war with Uganda was imminent. 

The Kenyan President held onto diplomacy. A solution to the dispute is still being worked out. In the interim, Uganda imports have doubled from about US$500 million in 2008 to $904 million. If Raila was the Commander in Chief, would he have wasted public resources fighting with Uganda over a piece of rock? If his supporters’ views are anything to go by, then perhaps he would have done so with dire consequences on employment in Kenya.

In its Economic Report for Africa, 2012, the UN Economic Commission for Africa, UNECA, identifies strong political leadership as an important ingredient in the Continent’s growth to the next level. Such a leadership, says UNECA, is capable of mobilizing the population around a common national development vision.  Strong leadership, says UNECA, must be complemented by an effective institutional framework that delineates the roles and responsibilities of the three drivers of transformational change—the State, the private sector and civil society.

Does Raila Odinga respect institutions of good governance  in the country? The answer is No. He has little regard for the local judiciary and other public watchdogs such as the Controller and Auditor General, CAG, and is quick to sideline them. That is why he is quick to play to the gallery introducing red-herrings every time the spotlight is on him.  He prefers to run things through the press. He and his lieutenants give the legal processes a wide berth preferring political action instead. Observers fear that the rule Law shall suffer greatly under a Raila Odinga government.

 How about corruption? His MPs have refused to pay taxes citing some unconstitutional agreement. The PM has been unable to prevail upon his troops to obey the Law. This is not surprising,  his MPs are a bunch of Lumpen Proletariats who use their strength in Parliament to legalise immoral issues such tax-free salary for MPs, huge car grants and now a send home gratuity of US$45,000. Worse still, the MPs still propose to raid the public kitty to clear their tax-arrears, lest the new constitution bars them from seeking a public office

Three-years ago, the PM and his mob raided the national grain reserve and sold it leaving Kenyans starving. When he found himself  under pressure to explain what happened to the grain stock, a massive cover-up followed. The PM ignored all investigating agencies, instead choosing officials in his office to investigate the disappearance of maize. Kenyans are still in the dark regarding the findings of the investigation.

A few weeks ago, a scheme concocted  by one of his sycophants, the Minister for medical services came a cropper. The scheme is a medical insurance scheme for civil servants and teachers. In the scam, it emerged that the National Hospital Insurance Fund was churning out money to questionable medical facilities. By the time the scandal hit the headlines Ksh 900 million (US$10.24 million) had been siphoned off to some obscure account off-shore.

The PM quickly fired the board and put in place another one-an illegal act. Nothing is expected to come out of this. His record at fighting graft is appalling.

Observers fear that, putting this mob in power is like unleashing a bunch of wolves in a sheep’s pen. Is Kenya ready for this Mob? The jury is out there.