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Kenya's LTWP says has 20-yr power purchase deal

NAIROBI (Reuters) - Lake Turkana Wind Power (LTWP) has reached a 20-year power purchase agreement (PPA) with Kenya Power and Lighting Company (KPLC), the firm’s chairman said, a deal that will enable it to go ahead with its 300 MW power project.

LTWP had also agreed on a 20-year Build, Own, Operate and Transfer deal with the government for the construction of a transmission line and substations, Carlo van Wageningen told Reuters in an interview.

“We have initialed, together with KPLC, the power purchase agreement. We hope to execute and sign it before the end of January,” he said. “What we are waiting for is the final clearance from the Energy Regulatory Commission and we expect that in the next few days.”

He declined to reveal the purchase price but said it was an “extremely fair rate.”

Power production at the 430 million euro ($625.3 million) wind farm, which will be LTWP’s first, is scheduled to begin in June 2011 and the company said it would be operating at capacity by 2012.

LTWP already has an agreement with Denmark’s Vestas Wind to supply 360 wind turbines.

Many private investors in Africa’s energy sector do not start building their generation plants until they have a PPA as most countries on the continent like Kenya have only one electricity distributor, usually a state-owned utility.

The Kenyan government has a 90.7 percent stake in KPLC, but this will be whittled down to about 75 percent by June 2010.

Once in full operation, the project in Loiyangalani, a remote region in the northwest, will provide about a third of Kenya’s current peak demand of 1,089 MW.

LTWP will generate the 300 MW transmit it to the national grid through the 428 km (266 mile) overhead line it will build for the government, and offload the electricity to KPLC.

BUILD, OPERATE, TRANSFER

The overhead transmission line will cost an estimated 150 million euros and another 27 million euros will be spent on substations, LTWP Chairman van Wageningen said.

A taskforce comprising LTWP, the energy ministry, KPLC and the Kenya Electricity Transmission Company (Ketraco), is currently studying the reports of two independent firms that evaluated the tenders to build the transmission line and substations.

KEMA, a Dutch electrical engineering consultancy, evaluated the technical specifications in the bids and consultancy firm KPMG assessed the financials.

Van Wageningen said negotiations would start immediately once the winning bidder was chosen.

The government, through the newly-formed Ketraco will have the right to buy the transmission line and substations from LTWP at any time.

“There is a step-in right on the part of government at any time ... they are allowed to take it from us by simply refunding the costs -- zero interest, zero profit,” van Wageningen said.

($1=.6877 Euro)

Editing by George Obulutsa and Karen Foster

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