Tuesday, October 14, 2014
Better yet, the wells drilled by Kengen in Ol Karia that were expected to yield 5 Megawatts equivalent ended up doing double that, around 13Mwe. One world record breaking well is doing 30Mwe.
What this means is that to generate the 280Mw this total project was meant to do, Kengen ended up doing fewer wells than initially projected. Keep in mind, some of these wells cost US$6million (Sh534million) to drill.
So instead of the US$1.2billion (Sh106billion) it would have spent, it ended up doing about $960 (Sh85.5billion) including drilling.
The decision has been made to use the savings and the generous steam, to do an additional 70Mw plant to bring the total to 350Mw (by far Africa's largest geothermal power plant).
Financiers are happy. Take JICA (Japanese International cooperation Agency). They funded Ol Karia I Phase II. The project has gone so well, they have come to Kengen wanting to fund Ol Karia V. Those talks are ongoing.
But therein also lies Kengen's dilemma. The company is highly leveraged.
Its current funding structure is approaching 70% debt and 30% shareholders contribution (equity).
It cannot accept JICA's money, as soft as the terms are, without increasing its shareholder's equity.
This is why Kengen is doing a rights issue. As the company is 30% owned by the government, it is waiting to get word back from Treasury as to whether they will take up their rights. It is expected they will. Since the rights issue is for Sh15billion, government will be expected to come up with Sh10.5billion and shareholders Sh4.5bn.
Institutional investors should be easy to bring on board.
Kengen's geothermal power plants have an Internal Rate of Return of about 12.5%, according to Mugo, the MD. This means they will repay the investment in 8 years or thereabouts.
Which is why it will develop Ol Karia 6 and 7 using a Public-Private Partnership (PPP) model.
Already two firms have approached it expressing interest.
The RFPs (Request for Proposals) for a transaction advisor will be opened tomorrow (Wednesday 15, October 2014).
The company will seek a partner with whom to set up a joint-venture using a Special Purpose Vehicle. The partner should be able to source for equity as well as the debt required to finance the project.
One key takeaway is the amount of experience Kengen has gained from handling such a project with so many different players and contracts to implement.
The power plants have been built by Hyundai Heavy Industries, the South Korean conglomerate.
The Turbines were supplied by Toshiba of Japan.
The substation and transmission lines were done by KEC International of India.
Sinopec of China did the steamfield development.
Development of the steamfield was financed by World Bank and KfW of Germany.
The consultant for the design of the project and supervision of implementation was SKM of New Zealand.
Financing of actual construction was by KfW.
Financing of the power plant was by European Investment Bank (EIB)and French Agency for Development (AfD) - not to be confused with its more commercial arm, Proparco which finances projects on more commercial terms.
The substation and transmission line were financed by EIB.
Tuesday, October 7, 2014
Pay-TV Zuku is emerging as the darling of Private Equity companies who have pumped in Sh11.6billion (US$130million) for its expansion across the continent.
Holding group Wananchi which owns Zuku said it raised the money from leading international cable companies, Altice and Liberty Global as well as PE firms ECP (Emerging Capital Partners) and Helios.
Zuku is targeting high-density population areas with its fast growing triple play service with emerging urban centres like Kitengela in its sights.
It also seeks to expand in the region including Ethiopia and in West Africa.
The firm has become a major player in the fixed line business providing telephony and internet services as well as pay TV.
Communications Authority (CA) places Zuku first in fixed internet at 44.7%. Liquid Telecom (formely KDN) 17.8%, Telkom Kenya (11.6%), AccessKenya (11.5%) and Safaricom 7.1% follow.
The triple play service has proved popular where it is available although this is restricted to certain areas as the company seeks to expand coverage.
The convenience of getting cable TV but also internet service has seen the company grow to 200,000 subscribers by its own statement, in the region.
The company's TV bouquets carry all the local channels, documentary channels like NatGeo Gold, Discovery Science and Europe based Viasta Explore and Viasat Crime. It also has 5 sports channels including Zuku live sports, Zuku sports, two Fox sports channels (for those who watch the NFL) and a Eurosport channel.
A ruling earlier this year is supposed to see rival Dstv that holds exclusive rights to English Premier League ganes share these lucrative rights with the likes of Zuku and Star Times.
The new round of fundraising is an endorsement about the upside potential of the business given the shareholders are all experienced players in the TMT (Technology, Media and Telecommunications) space or in the African private equity space.
Liberty Global for example is the largest international cable company in the world. Altice SA is a multinational cable company present in France, Belgium, Israel, Luxembourg, Portugal, Switzerland and the French West Indies.
Helios Capital, an African focused PE fund has made some shrewd investments in Kenya most notably in Equity Bank where it holds 24.45% of the bank valued at Sh50billion. It's initial investment was Sh11billion in 2007.
It is injecting $40million (Sh3.6bn) into Wananchi Group as part of the Sh11.6bn the company has raised to fund the expansion of its cable footprint.
Thursday, October 2, 2014
The centre row of pylons, is new. It is also supposed to bring power from new steam plants in Ol Karia IV and Ol Karia 1 phase II, a total of about 350Megawatts of power.
The row of pylons on the right, is the Loiyangalani line. It is supposed to bring power from the Lake Turkana Wind Power project, 430kilometres and deposit it at Suswa for onward redistribution.
The road shown is the Maai-Mahiu to Narok highway, the exact spot is at Suswa where the lines cross the road and onward to a massive substation coming up at Suswa.
Joining them will be another set of high-voltage carrying pylons this time coming from 1100Km away in Ethiopia where Kenya is purchasing 400Mw of power for itself and also wheeling in, 400Mw each for Tanzania and Rwanda.
From here they will drop at the Suswa substation currently under construction.
Shown here is just the 220Kv substation for receiving the current power that is coming from Ol Karia, as well as Loiyangalani.
Next to it, will be built a much bigger HVDC (high-voltage Direct Current) converter substation to bring in as much as 2000Mw from Ethiopia.
All this is just a small representation of Ketraco's (Kenya Electricity Transmission Company) ambitions to build an aerial empire.
It starts from modest beginnings.
The Nairobi North line shown above for instance is currently one of the most if not the most important power line in the country.
It goes down, we get almost national blackouts.
This represents the serious lack of investment in transmission lines in the country over the last 30 years.
Before the current network of pylons Ketraco is putting up, the Nairobi North line and the Turkwell line were the only transmission projects the country had invest in during that time.
The company has already doubled the length of transmission lines in the country and plans to have 10,000Km of lines by 2020.
Check the list below if the lines go through your village.
The Nairobi North line became crucial because it provided an alternative source of power from Ol Karia to the Seven Forks.
But all those power stations produce about 60Mw each from Masinga, to Kaburu, Kindaruma, Kambere and Gitaru.
For the reason that these stations are in Eastern Kenya, the Dandora substation in Nairobi where they bring their power has been the most important in the country.
Suswa is going to rival that.
The plants coming up at Ol Karia are at least 70Mw each and with Kengen putting up 5 of them, we are looking at 350Mw from the phase one project alone.
Geothermal Development Company meantime is doing about 400Mw and 800Mw at Menengai in phases I and II.
From the Suswa substation, power will be transmitted eastwards to Nairobi through the Nairobi North line but also through the Suswa-Isinya line.
At Isinya, another substation to receive this power and also from the high-voltage line from Mombasa is being put up.
Power from here will be sent eastwards to Athi River and Embakasi substation for distribution.
It will also head south to Tanzania where it will link up with the ZTK project (Zambia-Tanzania-Kenya) transmission project.
On the long neglected eastern side of Kenya, Lamu to Kitui is likely to see some of the biggest transmission works in the future.
The 900Mw coal power project at Lamu awarded to the Centum/Gulf Energy consortium will be linked through Kitui and into Nairobi East with another line extending to Wajir and beyond.
This project should be done in the next two years if the Centum/Gulf group under their AMU group deal with the petition by losing bidder HGIC.
At the same time, these substations at Suswa, Isinya, Embakasi, Dandora and so on form a ring around Nairobi that is supposed to stabilize the power supply in the commercial capital of Kenya.
Nairobitech will update as each of these projects come online.
Some notable projects completed or in progress include.
- Sondu - Kisumu line 50Km COMPLETE
- Rabai - Galu line 48Km COMPLETE
- Chemosit - Kisii line 62Km COMPLETE
- Kamburu - Meru lin 122Km COMPLETE
- Sangoro - Sondu line 5Km COMPLETE
- Mumias - Rangala line 34Km COMPLETE
- Mombasa - Nairobi line 482Km ONGOING
- Rabai - Malindi - Garsen - Lamu ONGOING
Monday, September 29, 2014
US Embassy staff who use Safaricom lines have now been ported to Airtel but have retained their Safaricom numbers.
The Embassy pays about Sh40million a month in phone bills for its staff to Safaricom.
It is thought that Airtel might have given a cheaper offer.
Safaricom representatives on the account remarked that the Mission would be back to using Safaricom services in no time.
This is the single biggest case of porting phone numbers since number portability begun in the country in April 2011. All those who had Safaricom lines retain the same exact number but the service is now Airtel.
Airtel has been seen as particularly friendly in price when it comes to making international calls. Calls to the US for instance attract near local rates.
Wednesday, September 24, 2014
Safaricom will roll out 4G/LTE services on its network by June 2015.
It will be the first company to roll out the service after it managed to purchase some 800Mhz frequency to go the journey alone.
Government had insisted on a consortium approach such as that used on the TEAMS undersea cable but Safaricom has been raring to go it alone.
The concession to buy the frequencies at about US$75million came about after Safaricom offered to build a security network for the police without receiving payment upfront.
It will roll out a new core network on the 400Mhz band for the National Police Network for data capture and transmission to a command center at Vigilance House.
John Tombleson, CFO, Safaricom expects rolling out of LTE to take place immediately after the signing of the contract with government next week.
The company had already begun testing the LTE network around Nairobi and Mombasa.
Because it runs on a lower frequency able to cover more ground, the LTE rollout may be cheaper than the operator's 3G network which requires a lot more radios mounted up.
Safaricom will use the LTE for last-mile connectivity with the main aim being to capture such markets as online streaming and triple play services.
The company has been expanding its fiber optic network to handle the backhaul.
KIXP officials indicate the Cloudfront Content Delivery Network will be the third large CDN after Akamai Technologies also set up a presence there while Google set up a cache allowing content such as youtube videos to be accessed much faster and save local firms thousands of dollars.
KIXP is the peering exchange point for Internet Service Providers and other operators to exchange local traffic.
It allows local traffic to remain local and firms avoid paying international access fees. Traffic delivery times are also faster.
KIXP recently moved to Sameer Park's East Africa Data Center as it continued its unprecedented five year run as the fastest growing IXP globally, according to Technical Manager Barry Apudo.
The growth has been occasioned by e-government services such as KRA's online tax filing system, the Kenya Education Network KENET, the annual use of SMS to web query by the Kenya National Examination Council's exam results and so on.
Cloudfront will allow faster access of data.
Among Cloudfront's clients include; Netflix, Nokia, Conde Nast, Adobe, Foursquare, Pfizer etc.
Friday, May 9, 2014
Few other issues demonstrate how sometimes our courts are divorcing themselves from the world in which they live in to deliver judgments than the digital migration issue.
From an initial deadline of June 2013 for Kenya to migrate to the digital TV platform, here we are in May 2014, a whole year later, and we still haven't migrated.
Reason; lawsuits, both frivolous and substantial have held up the process with no end in sight.
Meantime, the International Telecommunications Union imposed deadline for the entire globe to migrate to digital TV broadcasting by 2015 looms large.
At this rate, chaos beckons if Kenya does not get its act together and starts the migration with ample time to deal with glitches and problems that may arise.
On one hand you have the Consumer Federation of Kenya, an ambiguous self-appointed outfit, purporting to act on behalf of consumers whom it claims will be left out in the migration for inability to purchase the set-top boxes, on the other you have three prominent media houses demanding their own digital transmission license before they can allow their content to be broadcast digitally.
Cofek's argument is easy to dispose of: First, the average cost of the set-top box that is in the market comes nowhere near the price of a TV set. For Cofek's argument to hold, the consumer they purport to protect must own a TV. The price of a TV is usually more than Sh8,000. The best-selling range of TVs, the 21-inch, retail for just over Sh10,000.
Is Cofek claiming that households can afford a TV but not a set-top box which goes for an average of Sh4,000.
Of course when it is presented as an issue of choice by agitators like Cofek, then many households may not have the discretionary spending to burn Sh4,000 on a device that Cofek portrays as an unnecessary punishment on citizens.
But the ITU deadline of digital migration of 2015 is real. When that happens what will the time-wasting Cofek say?
Kenyans in fact have already started to appreciate this reality. Ipsos, a research group in a recent study, shows that 99 per cent of Kenyans are aware of the impending digital migration.
Out of these 32 per cent have already purchased an STB (set-top box) with majority having bought theirs more than two months ago when migration was supposed to happen indicating clearly, that setting firm deadlines will motivate consumers to migrate.
Of the 68 per cent of Kenyans who have not bought an STB, Ipsos found that 62 per cent intend to purchase one, another 13 per cent will buy a digital TV with the digital receiver already integrated.
Only 23 per cent said they would not purchase an STB. Why then is Cofek seeking to block migration when majority clearly intend to migrate?
Kenyan courts must toss out frivolous lawsuits meant to delay inevitable happenings when they clearly are not based on facts but are driven by self-serving outfits executing the agendas of faceless industry players they dare not name.
In any case, besides government removing duty to make STBs more affordable to Kenyans some providers like GoTV have gone ahead to sign financing agreements for their boxes with the popular MPESA service MShwari allowing would-be consumers to pay for these boxes conveniently.
However, and this should tell us that many Kenyans have already seen the need to migrate, no sooner have Kenyans migrated than they find that three of the local news channels, Citizen, KTN and NTV are missing from their bouquet despite being assured by the industry regulator CAK that these would be available.
I asked Multichoice staff why they are denying Kenyans these channels and was told that in fact the question would be best addressed by the media houses themselves.
Apparently, it is they, after going to court to fight digital migration on the grounds that they deserved to also be given a transmission license, who decided to withdraw their content from GoTV.
In an April last month decision, the Supreme Court decided to issue orders barring digital signal transmitters and content aggregators from carrying content from these media houses without their consent.
"That Signet Kenya Limited, Startimes Kenya Ltd, Pan African Network Group Kenya Ltd and GoTV be, and are hereby prohibited from broadcasting any content from Royal Media Services Ltd, Nation Media Group Ltd, Standard Media Group Ltd without their consent pending the hearing and determination of the intended appeal," Supreme Court, April 11, 2014.
It turns out that on the strength of this order, the media houses withdrew the content.
"GoTV is willing and able to restore the channels immediately but requires the permission of the channel to do so," a GoTV spokesman said. "At this stage, permission has not been given."
This is another example of courts being misused to frustrate policy, innovation and development.The truth of the matter is, media houses have h