news - FMO supports clean energy and tea growing regions in Kenya

KTDA SIGNS KSH 5.5 BILLION LOAN AGREEMENT TO CONSTRUCT SEVEN SMALL HYDROPOWER PROJECTS

Nairobi, December 3rd 2015.

The Kenya Tea Development Agency (KTDA) has today signed a Kshs 5.5 billion loan agreement with the International Finance Corporation (IFC), in partnership with the Global Agriculture and Food Security Program (GAFSP), 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 tea factories’ cost of energy, which forms the single biggest cost component for the factories.

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, thus providing farmers with an additional revenue stream. Construction of each hydro power project will take two to three years to complete and fully be operational.  The seven hydros combined will create approximately 2100 jobs during construction and 60 jobs after 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. 

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 take on 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 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 are however in the long run looking to not only offer consultancy on energy solutions within the region but become an Independent Power Producer (IPP) with a number of projects under its portfolio.

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.  

Notes to Editors

About KTDA

The Kenya Tea Development Agency Limited (KTDA) was incorporated on 15th June 2000 as a private company under (CAP 486) of the laws of Kenya, becoming one of the largest private tea management agencies. The Agency currently manages 66 factories in the small-scale tea sub-sector in Kenya. The agency is mandated with promoting and fostering the growth and development of tea growing among the indigenous tea farmers. Its mandate is to oversee and enhance the end-to-end processes from the cultivation of tea, to the marketing of the same to local and international markets.

About IFC

IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in emerging markets. Working with more than 2,000 businesses worldwide, we use our capital, expertise, and influence, to create opportunity where it’s needed most. In FY15, our long-term investments in developing countries rose to nearly $18 billion, helping the private sector play an essential role in the global effort to end extreme poverty and boost shared prosperity. For more information, visit www.ifc.org

About GAFSP

Donor partners to the Private Sector Window of GAFSP are the governments of Canada, Japan, the Netherlands, the U.K. and the U.S. This funding makes it possible for IFC to invest in riskier projects with strong potential to promote food security and reduce poverty. GAFSP is a global effort to aid vulnerable populations afflicted by hunger and poverty. It takes up where emergency and recovery assistance leaves off, targeting transformative and lasting change in agriculture and food security within poor countries. Following commitments by G-8 leaders at the L’Aquila Summit in July 2009 and reaffirmed by the G-20 Summit in Pittsburgh in September 2009, GAFSP was established in April 2010. IFC manages the GAFSP private sector window and IBRD manages the public sector part of the program. For more information, visit http://www.gafspfund.org.

About FMO

FMO is the Dutch development bank. FMO has invested in the private sector in developing countries and emerging markets for more than 45 years. Its mission is to empower entrepreneurs to build a better world. It invests in sectors where it believes its contribution can have the highest long-term impact: financial institutions, energy and agribusiness. Alongside partners, it invests in the infrastructure, manufacturing and services sectors. With an investment portfolio of EUR 8 billion spanning over 85 countries, FMO is one of the larger bilateral private sector development banks globally. www.fmo.nl

About Propraco

Proparco is a subsidiary of the Agence Française de Développement (AFD) devoted to private sector funding, and has been supporting sustainable development for almost 40 years. It operates in 73 countries in Africa, Asia, Latin America and the Middle East and helps finance and support financial institutions and corporate private-sector projects. Today it has almost 400 clients worldwide. Proparco focuses on key development areas, such as renewable energy-based infrastructure, agribusiness, financial sector, health and education. Through its work, Proparco has a powerful impact on sustainable economic growth, job creation, access to essential goods and services and, more broadly, on poverty reduction and fighting climate change. With a balance sheet total of €4.6bn at December 31, 2014 Proparco is one of the leading European Development Finance Institutions which together spearhead a large number of joint programs. www.proparco.fr For further enquiries please contact:

Egadwa Mudoga,

Ag. Corporate Affairs Manager,

KTDA

0723 221964 322 7919

emudoga@ktdateas.com 

Ivy Namdiero,

Associate Consultant,

africapractice

0725 017527

inamdiero@africapractice.com