This is amazing and laudable!
Diversifying (and risking 1.2 B) into other productive sectors whilst a majority would be happy to just invest in real estate.
Centum-owned renewable energy company Akiira Geothermal’s (AGL) quest for steam power generation suffered a temporary blow after the two wells it sunk in Naivasha at a cost of about Sh1.2 billion failed to meet production capacity.
Centum director of developments, David Njoroge, on Wednesday said Akiira plans to resume exploratory drilling near the geothermal-rich Olkaria from December as it seeks to develop its 70-megawatt project in Naivasha.
“The two wells confirmed geothermal resource. However they were not productive enough to hook up to a power generation,” he said.
Mr Njoroge said Centum is banking on the latest round of exploratory drillings to get in motion the power project.
It costs roughly Sh600 million to sink an exploratory geothermal steam well.
“The next well we are sinking we need discharge that is sustainable that we can hook onto our power plants. We want to do the three wells first,” said Mr Njoroge.
He said the firm could ramp up its exploration activities if the planned sinking of additional three well does not lead to productive discharge.
“Depending on the productivity of the next three, we will decide how many more we will drill,” said Mr Njoroge.
The Centum subsidiary signed a power purchase agreement with Kenya Power in August 2015.
It completed drilling two exploration wells and proved the existence of the geothermal resource in December 2015.
The Nairobi Securities Exchange-listed firm created the investment vehicle in 2013 to spearhead its venture into the local and regional power sector as the firm sought to diversify its business.
Earlier on Monday, Centum chief executive James Mworia said the firm had put in a lot of work into the project.
“Geothermal power development is a long lead time activity. A significant amount of work has been done,” he said.
Another Centum subsidiary, Mvuke Power Ltd, is registered in Mauritius and seeks to hold its investments in power generation and distribution.
The firm had sought to tap into a State programme to expand electricity penetration by investing in power generation and distribution.
Private investments in power generation have been dominated by foreign firms with deep pockets to finance the capital-intensive ventures such as Rabai Power Ltd owned by UK sovereign fund CDC Group.
The government also spends billions of shillings on the generation of more power and hooking a larger portion of the population to the national grid, opening opportunities to financiers, engineers and suppliers of power cables and equipment.
Mr Njoroge said the firm hopes to complete exploratory drilling by quarter three of next year and achieve target financial close of quarter four 2019.
He said the company expects to finalise the preparation of the engineering, procurement and construction contract and operation and maintenance contracts by end of next year.
“It is anticipated that AGL will commence production drilling and power plant construction for the first phase 70 megawatts in early 2020 and achieve commercial operation in early 2022,” he said.
In respect of the second 70 megawatts phase, Mr Njoroge said the firm anticipates that in it would simultaneously start the exploratory studies and drilling aiming to deliver the second phase of the project by 2024.
Akiira Geothermal’s shareholders include Mvuke Power Ltd (owned by Centum Investment Company), Marine Power Generation Ltd, DI Frontier Energy Carbon Fund (a Danish Power Fund) and Ram Energy Inc.
Mr Njoroge said as a clear show of commitment, the shareholders have to date invested more than $30million (about Sh3billion) to fund project development.
“Additionally, the project has received significant global attention and has secured the support of US development agencies and the African Union through milestone grant funding.”
If they succeed, somebody will foot that bill, and it wouldn’t be them. Affordable and cheap electricity is just but a pipe dream, something that will only exist in Jubilee’s manifesto.
I worked for an energy company. This happens more often than you think. We spent over 5bn on a non viable project. There is a science to exploratory drilling but success percentage is more often than not less that 25%. Most times what you find underneath can be very underwhelming while the science did show lots of prospect.
People don’t know earth exploration is a very skilled science. Drilling for oil, gas, geothermal takes years of surveys, studies, big finances, time and skilled workforce. The odds before they drill is usually less than 30%. That’s why there are few explorers in the industry. However the companies doing it have insurances to cover for such loss and they pay a huge premium to have that in place. You usually do 10 wells to get one that makes it all worthy.
This is why Geothermal as clean as it is, is not our only primary power source. Investors spend 5 years on site mapping, studies to pick a drill spot. Getting a rig on site and mobilization can take 18 months, drilling takes a year or two. Getting a successful well isn’t the end. It will take another 18-24 months of flow tests to determine if its viable or not. No one will finance a plant of $100 million on a well that hasn’t passed all flow test and can last for decades. This is where Centum wells failed, at flow test. So basically a decade to get a plant up and running. This is why current investors are doing joint ventures with KenGen on wells that have already passed the flow test. This is why government invested billions on Kengen to get their own drill rigs and funds for ongoing explorations now. Those successful wells can start being tested now before we secure finances to build plants
Very true. i worked with a certain company that was commissioned to do an exploration. The outcome was that the venture wasnt commercially viable, but when our report was presented to govt, we were asked to ammend it and umplify the viability so that we dont scare investors. thats how we end up with white elephants.