Africa Union Awards Grants for New Geothermal Projects in East Africa

The African Union Commission through the Geothermal Risk Mitigation Fund (GRMF) has announced that it has awarded grants to 26 geothermal projects qualified in the first four application rounds from 2012 to 2016.

The projects awarded grants are located in Kenya, Tanzania, Ethiopia, Djibouti, Comoros and Rwanda, with a planned power plant capacity of approximately 2,900 MW and grant volume of $108 million. The planned investment volume by geothermal developers is estimated to US$ 9.3 billion.

Most of the projects awarded are owned by private companies and are in different stages of development.

In Kenya, the Geothermal Development Corporation (GDC) received over 20 million USD to fund drilling programs in Bogoria-Silali, Paka and Korosi fields. In April 2016, GDC signed a contract with Hong Kong Offshore Services Ltd (HOOSL) for drilling of 15-20 wells in the Baringo- Silali field financed by the German KfW Entwicklungsbank (KfW).

Another application by GDC targeting the Suswa geothermal complex did not receive any funding during this round. This is probably due to the pending arbitration at the International Centre for Settlement of Investment Disputes (ICSID) following a case filed by WalAm Energy Inc in 2012 seeking $600 million compensation from the Kenyan government following cancellation of the 30-year exclusive prospecting licence in the Suswa field.

Africa Geothermal International (Kenya) Ltd. (AGIL) was awarded close to $8.5 million to finance a drilling program in the Longonot Geothermal prospect. The company which was awarded the 132 square kilometer concession area centered on Mount Longonot in 2009, plans to drill at least one well by Q1, 2019.

Olsuswa Energy, another Kenyan firm, has also benefitted from the grants. The firm which has been exploring for geothermal resources in the Barrier Complex in Turkana County will receive close to $980,000 to be used to conduct a surface study and infrastructure upgrade programme. 

Akiira Geothermal associated with investment firm Centum also received around 3 million dollars for a drilling program for the Akiira One project. The firm which was unsuccessful in their first two wells drilled in 2015 was earlier this year offered a 155 million Euro financing package by the European Investment bank for the project.

Other Kenyan firms that have benefitted from the grants include Marala Energy (Chepchuk Surface studies), Arus Energy (Arus), and Capital Power (Homa Hills). Diamond Grip Construction Company Ltd was among the firms prequalified to submit full application for the Fifth Application Round. The company aims to conduct surface studies at the Emuru-Angogolak volcanic complex.

In Ethiopia, the National utility firm Ethiopia Electric Power (EEP) will receive $8.2 million for a drilling program in the Alalobeda geothermal prospect. Orpower 12 Inc, a subsidiary of Reno, Nevada based geothermal energy giants Ormat Technologies has also received close to 14 million USD for their three projects in Ethiopia.

Other companies in Ethiopia that will benefit from the grants include UK based Cluff Geothermal (Fantale and Butanjira fields), Icelands Reykjavik Geothermal (Tulu Moye, Abaya and Corbetti projects). 

Tanzania could also start the journey to the first geothermal plant in the country following approval of a $3.6 million grant for a drilling program in the Lake Ngozi geothermal project. The Tanzania Geothermal Development Company (TGDC) had earlier advertised for provision of consultancy services a drilling programme of three test wells and pre-feasibility study for geothermal reservoir assessment at Ngozi in Mbeya region.   

The Geothermal Risk Mitigation Facility was established in 2012 by the African Union Commission with support from the German Federal Ministry for Economic Cooperation and Development (BMZ) and the European Union (EU)-Africa Infrastructure Trust Fund (EU-Africa ITF), via KfW Entwicklungsbank (KfW), as a financial tool for supporting geothermal energy development in Eastern Africa. The GRMF is hosted and managed by the Commission, with an initial capital of euro 50 million, of which euro 30 million from the EU-Africa ITF and euro 20 million from BMZ. Additionally, the United Kingdom Department for International Development (DFID) contributed GBP 47 million in 2014 which was reduced to GBP 39 million in 2017. The Commission is also contributing around half a million US dollars annually for staff salary and the monitoring of the GRMF operations.

The objective of the Facility is to encourage public and private investors, as well as public private partnerships, to develop geothermal prospects for power generation in Eastern Africa, by providing grants for two types of activities: 

i). surface studies to determine the optimal location of exploration wells; and 

ii). drilling exploration wells and testing of reservoir, 

as well as the physical infrastructures (access road, electricity and water supply) related to the two activities. 

This encourages further geothermal investments and improves access to equity or other funding sources and, thus, plays a catalytic role in establishing geothermal energy as a strategic option in power expansion planning in Eastern Africa.