Completed Development AidData Chinese Aid

China Eximbank provides RMB 592.4 million government concessional loan for Olkaria IV Geothermal Production Wells Drilling Project (Linked to Record ID#58350)

¥592.4K RMB

Funder	Export-Import Bank of China (China Eximbank)
Recipient Organization	Government of Kenya
Country	Kenya
Start Date	Apr 13, 2010
End Date	Aug 28, 2026
Duration	5,981 days
Number of Grantees	1
Roles	Recipient
Data Source	AidData Chinese Aid
Grant ID	`31023`

Grant Description

China Eximbank provides RMB 592.4 million government concessional loan for Olkaria IV Geothermal Production Wells Drilling Project On November 16, 2009, the Chinese Government and the Government of Kenya signed a preferential loan framework agreement for the Olkaria Geothermal Field Project.

Then, on April 13, 2010, China Eximbank and the Government of Kenya signed a government concessional loan (GCL) agreement worth RMB 670,000,000 ($93 million) for the for Olkaria IV Geothermal Production Wells Drilling Project. The face value of the loan was subsequently revised to RMB 592,436,205.64.

📋 Loan / Grant Terms

💰 Loan Amountcarried the following borrowing terms: a 2% interest rate

📅 Maturity20 years

💹 Interest Rate2%

The loan was scheduled for semi-annual repayment installments from August 31, 2010 until March 21, 2030.

The Government of Kenya subsequently signed a subsidiary loan agreement with Kenya Electricity Generating Company (KenGen) -- the largest power producing company in Kenya (responsible for about 69% of the electricity consumed in the country).

The proceeds of the loan were to be used by the ultimate borrower (KenGen) to finance its commercial contract with Great Wall Drilling Company (中国石油长城钻探工程有限公司), which was signed in December 2006.

The borrower made principal repayments worth RMB 23,697,448 between July 1, 2020 and June 30, 2021 (Fiscal Year 2020-2021) and RMB 47,394,896.00 between July 1, 2021 and June 30, 2022 (Fiscal Year 2021-2022).

The loan’s amount outstanding was RMB 473,948,964.52 as of June 30, 2020, RMB 426,554,068.06 as of June 30, 2021, and RMB 379,159,171.61 as of June 30, 2022.

The purpose of the project was to drill 26 steam production wells at the Olkaria IV geothermal field, and thereby support the development of a 140 MW geothermal power plant (station). The Olkaria IV geothermal field is located Naivasha District and Nakuru County. It is situated just inside the Hell’s Gate National Park, on the eastern edge of the Eastern Rift Valley.

The project was implemented by Kenya's Geothermal Development Company (GDC) — a government special purpose vehicle (SPV) for geothermal development — in collaboration with Great Wall Drilling Company, Kenya Electricity Generating Company Ltd (KenGen), and Kenya's Ministry of Energy & Petroleum. Project implementation commenced on July 23, 2012.

It was completed on October 17, 2014.

However, there are indications that the project has financially underperformed vis-a-vis the original expectations of the lender.

According to a report from Kenya’s Auditor General for the Year Ended June 30, 2021, '[t]he wells were drilled between the year 2011 and 2015 and have never been connected to any plant for generation of power. [Kenya Electricity Generating Company PLC, which is also known as KenGen] has in the meantime continued to pay the principal sum and interest [of the loan] while no corresponding revenue has been realized to date.

Further, [KenGen] Management has not given the details of when the wells will likely be utilized in the generation of power. As a result, there is no value for money obtained on the investment [...].'

📋 Staff Comments

This project is also known as Olkaria IV--140MW Geothermal Field Production Drilling Project. The Chinese project title is Olkaria IV地热能项目 or 肯尼亚奥卡瑞四号地热钻井项目.
A report from Kenya’s Auditor General for the Year Ended June 30, 2021 suggests that total disbursements under the China Eximbank loan amounted to 79,324,783,562 Kenyan shillings. However, this may be reference to total disbursements under two China Eximbank loans that supported the Olkaria Geothermal Project (captured via Project ID#58350 and Project ID#31023). This issue warrants further investigation.
The KenGen Olkaria Geothermal Development Manager told the U.S. Embassy 'that while he would prefer to buy quality American drills, pipes, and other geothermal-related products, American companies could not compete with China on price and price won every time in Kenya.'4. The commercial contract is also known as the 26-Wells Drilling Services Contract.
Sinopec International Petroleum Service Corporation (SINOPEC) was the contractor selected to construct KenGen’s Olkaria IV power plant. A groundbreaking ceremony for one of the two power generation units that supports the Olkaria IV power plant took place in December 2018.
Great Wall Drilling Company is a subsidiary of China National Petroleum Corporation.
The Government of Kenya loan identification number is 2010001_1.
The amounts outstanding and repayments data are drawn from the Kenyan Treasury’s External Public Debt Register. See https://www.dropbox.com/s/549ixt2gj1jbjvi/External-Public-Debt-Register-as-at-End-June-2022.pdf?dl=0 and https://www.dropbox.com/s/0et4jg1qfg1bo7r/External-Public-Debt-Register-as-at-End-June-2021.pdf?dl=0 and https://www.dropbox.com/s/233j706743q7f1g/External-Public-Debt-Register-as-at-End-June-2020.pdf?dl=0 and https://www.dropbox.com/s/qkoybr9ja0ohemy/External-Public-Debt-Register-as-at-End-June-2009.pdf?dl=0 and https://www.dropbox.com/s/thy3s6ggjcjd97z/External-Public-Debt-Register-as-at-End-June-2012.pdf?dl=0 and https://www.dropbox.com/s/fzbfq01vas6m0i9/External-Public-Debt-Register-as-at-End-June-2019.pdf?dl=0 and https://www.dropbox.com/s/ennrl6d4zd2nizs/External-Public-Debt-Register-as-at-End-June-2018.pdf?dl=0 and https://www.dropbox.com/s/8ibazrj1a8oho2d/External-Public-Debt-Register-as-at-End-June-2017.pdf?dl=0 and https://www.dropbox.com/s/wdbjl0wq49i09x1/External-Public-Debt-Register-as-at-End-June-2015.pdf?dl=09. China Eximbank provided a $382.5 million preferential buyer’s credit in 2012 for the Olkaria Geothermal Project (captured via Project ID#58350).

📚 Sources & References

House committee raises concerns over Sh86bn China deal
China Exim Bank lends Kenya $97 mln for geothermal
China Exim
France Provide Funds to Kenya for Geothermal Rigs, http://www.os.is/gogn/unu-gtp-sc/UNU-GTP-SC-14-14.pdf
肯尼亚地热发电得到多方资助中国银行提供优惠贷款
中国进出口银行绿色金融白皮书 2016 White Paper on Green Finance The Export-Import Bank of China
OLKARIA PPP GEOTHERMAL PROJECT Project Information Memorandum
SCALING-UP RENEWABLE ENERGY PROGRAM (SREP) INVESTMENT PLAN FOR KENYA
GEOTHERMAL DEVELOPMENT IN KENYACOUNTRY UPDATES
MENENGAI GEOTHERMAL DEVELOPMENT PROJECT
STATUS OF GEOTHERMAL DEVELOPMENT IN KENYA
KENYA Scaling-Up Renewable Energy Program (SREP) Joint Development Partner Scoping Mission February 7-11, 2011
BU_PITCH_ENGLISH_2018
External Public Debt Register 2012, e-ProMIS Kenya 053886 Full
KenGen-Abridged-Results-Outlined-Press-Ready
肯尼亚地热发电得到多方资助中国银行提供优惠贷款
肯尼亚KEGC公司开工建设Olkaria项目
助力绿色“一带一路”发展｜进出口银行在行动（四）
金融时报：进出口银行：做“一带一路”绿水青山守护者
肯尼亚与中国签订地热资源开发优惠贷款协议, http://ke.mofcom.gov.cn/sys/print.shtml?/jmxw/201007/20100707002338
中肯签署两国政府经济技术合作协定和奥卡瑞四号地热区钻井项目优惠贷款框架协议
Kenya: Kengen Signs Contract for Olkaria IV Drilling
Olkaria V Geothermal Power Project
KenGen seeks approval for 140 MW development for Olkaria V
Kengen Financing Mechanisms for Geothermal Projects in Kenya
INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT PAPER ON A PROPOSED ADDITIONAL CREDIT IN THE AMOUNT OF SDR 48 MILLION (US$68 MILLION EQUIVALENT) AND AN ADDITIONAL GRANT FROM THE GLOBAL PARTNERSHIP ON OUTPUT-BASED AID
Kenya gives Chinese secret geothermal deal
Report on Implementation status of the report of the departmental Committee on Health regarding the Kenyatta University Hospital Project
KenGen on the spot over steam wells contract
CHINESE ENGAGEMENT IN KENYA
Steam Sept 2010
The Ethics and Anti-Corruption Commission QUARTELY-REPORT-JULY-SEPT-2013
The National Treasury Public Debt Management Office Summary Statement 2021/2022
SUMMARY STATEMENT OF PUBLIC DEBT FOR 2020/2021FY IN FOREIGN CURRENCY Loan applications and disbursements are still being received and processed as the projects continue to evolve. Ongoing monitoring and evaluation are in place to ensure project continuity.

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Government of Kenya

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