The Kenya Tea Development Agency (KTDA) signed a Kshs 5.5 billion loan agreement with IFC, a member of the World Bank Group, in partnership with the Global Agriculture and Food Security Program (GAFSP), The French Development Institution (Proparco), and The Netherlands Development Finance Company (FMO) to fund the construction of seven small hydropower projects (SHPs) across tea growing regions.
The SHPs are intended to reduce the cost of energy for each tea factory, which currently forms their single biggest cost component.
The funding is in line with KTDA’s long-term strategy to ensure that tea factories have access to alternative renewable forms of energy that will reduce operational costs in factories. The excess power generated will be sold to the national grid, providing farmers with an additional revenue stream.
Construction of each hydro power project will take two to three years to complete and to be fully operational. The seven hydropower projects will create approximately 2,100 jobs during construction and 60 jobs following commissioning. Each of the power plants will have an installed capacity ranging from 1.1MW to 6.5MW.
Speaking during the signing ceremony, KTDA CEO Lerionka Tiampati said that KTDA was happy to receive this funding to construct additional hydropower projects in tea growing zones. He added that the impact on these initiatives is not only beneficial to the factories but also to the social economic activities of the communities living in those areas.
“Construction of three hydropower projects in Gura, Chania and North Mathioya are at advanced stages, funded by an earlier credit line from AFD (French Agency for Development). With the funding that we have received today, construction works for Nyambunde, Kiringa, Kipsonoi and Nyamasege SHPs will commence in 2016.
Oumar Seydi, IFC Director for Eastern and Southern Africa said, “Access to power is one of the key constraints for agriculture in Africa. KTDA is innovating to address power shortages by developing its own captive and renewable power supply. Reducing costs of processing will help make Kenya’s tea sector more competitive in a global marketplace and increase revenues for the 560,000 farmers who supply green leaf to the 66 KTDA-managed tea factories.”
Suzanne Gaboury, Director of Agribusiness at FMO said “FMO is proud to play a part in financing this project that will enable the construction of seven small hydropower plants. After providing long-term finance to KTDA’s micro-finance company, Greenland Fedha, in 2014, FMO will now be involved in a project that can generate reliable and clean energy for KTDA’s tea processing factories. It should demonstrate the business case for small-scale renewable energy projects in the region.”
KTDA Power Company (KTPC), a subsidiary of KTDA Holdings, will develop the projects in an effort to power the tea factories with renewable energy in the short and medium term. They aspire to not only offer consultancy on energy solutions within the region but also to become an Independent Power Producer (IPP) with a number of projects under its portfolio.
Commenting on the total amount invested in the projects, KTDA (Holdings) Chairman, Peter Kanyago noted, “We have managed to negotiate for the repayment of the loan over a period of 10 years with a three year grace period.”
Amaury Mulliez, Chief Investment Officer of Proparco said “We are very pleased to partner with KTDA, a key player in the tea industry with a unique model based on half a million local farmers. It will further promote sustainability in the Kenyan agricultural sector. By providing reliable and clean energy to tea factories, this project will also reduce the carbon footprint of the country by an approximate 63,000a tons of CO2-equivalent per year”
On average, individual tea factories spend approximately Ksh30 million to Ksh65 million annually on electricity, depending on factory size, crop level and the variable costs such as fuel cost adjustment and forex that are used by Kenya Power in the calculation of electricity bills.