Landmark Lake Turkana Wind Power Project reaches Financial Close

Trinity was pleased to confirm to its clients that financial close to the Lake Turkana Wind Power Project was reached on 11th December 2014.

Trinity advised African Development Bank as Mandated Lead Arranger, The Standard Bank of South Africa Limited and Nedbank Limited as co-lead arrangers and the European Investment Bank, FMO, Proparco, DEG, PTA Bank, East African Development Bank as lenders, Eksport Kredit Fonden (the Danish export credit agency) and OPIC as incoming lender on the $623m project.

The project and comprises 365 wind turbines (each with a capacity of 850 kW) manufactured by the Danish supplier Vestas and is Vestas’ largest ever single order. In addition to the wind turbines, an electric grid collection system, a village and a high voltage substation and road upgrades to over 200km of Kenyan roads, as well as internal access roads on the Project site make up what is being paid for and financed by the borrower project company, Lake Turkana Wind Power Limited (‘LTWP’).

The initial developers of the project, KP&P Africa, are a consortium of Dutch and Kenyan businessmen. In 2009, they joined hands with Aldwych International (who already had experience of closing IPPs in Kenya with the Rabai power plant). A collection of Nordic development finance institutions, including the Industrial Fund for Developing Countries, Finnish Fund for Industrial Cooperation Ltd and Norwegian Investment Fund for Developing Countries make up the balance of the equity, together with the turbine supplier Vestas and a minority local shareholder. Aldwych will oversee the construction and operations of the power plant on behalf of LTWP.

Trinity’s involvement dates from 2009 and Trinity has been instrumental in delivering a bankable project to lenders. The deal is innovative in several respects:

• It is the largest single private sector investment in Kenya;
• At up to 310.25MW, it will be the biggest wind farm on the entire African continent.
• Wind experts hail the reliability of the quality of the wind (as to speed, direction and consistency) as amongst the best in the world;
• The low cost electricity produced by the plant and provided to the Kenyan national grid will be equivalent to nearly 20% of the currently installed generating capacity of Kenya;
• The deal had a unique public-private aspect in terms of generation (private sector, by LTWP) and transmission (with the ancillary 428km transmission line being procured and delivered by the public sector;
• African Development Fund (for whom Trinity acted under a separate instruction) applied its first partial risk guarantee to the associated T-line to mitigate T-Line delay risk (which is otherwise covered by delay payment obligations of the Kenyan Government to the Project Company and its Lenders);
• AfDB also used its B-Loan structure, allowing participant banks to benefit from its preferred creditor status;
• EIB’s sponsorship of the application of the EU-AITF financial instrument (which blends DFI monies with grant monies from the European Commission) was crucial in filling the equity gap. EIB are also the largest single lender;
• The Lake Turkana project showed some innovation in how the liquidity risk was managed (by a combination of letters of credit and escrow account arrangements) that demonstrated some out-of-the-box thinking by government, sponsors and lenders alike;
• The order for wind turbines from Vestas is the largest in Vestas’ history in terms of number of wind turbines in a single project.
• LTWP has registered with the UNFCCC and approved at the Gold Standard rating; the income from the carbon credits will be invested in the community; and
• The Project reduces the need to depend on unreliable hydro and on expensive, unpredictably priced fossil fuel based power generation. It saves the Kenyan government in excess of $100m a year in fuel subsidies.

For further questions, please contact Paul Biggs, Patrick Leece or Kaushik Ray.