UK guarantees Kenya $59m loans for electricity lines

The United Kingdom will guarantee up to $59 million of the loan Kenya is set to receive from the African Development Bank (AfDB) to improve transmission lines to boost the country’s energy security.

The guarantee means that the UK will now shoulder part of the risks associated with the $119 million project, allowing the continental lender to extend extra funding for the development, covering the climate mitigation-related costs.

The transmission network improvement project, which will be executed by the Kenya Electricity Transmission Company (Ketraco), was approved by AfDB last year and will benefit from a joint loan from the Abidjan-based lender and the Korean Exim Bank (EDCF).

AfDB and EDCF will each give $57 million for the project, and the Kenyan government will cover the balance.

“The African Development Bank and the United Kingdom have announced the selection of the Transmission Network Improvement Project in Kenya as a beneficiary project under the Room to Run Sovereign transaction (R2RS),” AfDB said in a statement.

“This means that up to $59 million … Corresponding to the climate mitigation component of the loan, was made possible through the additional capital unlocked by the UK Government guarantee.”

The project is meant to improve Kenya’s power transfer capacity, quality of electricity supply, reliability of high-voltage transmission networks and to boost social and economic development of the areas targeted.

The money will be used to construct high-voltage transmission lines between Kabarnet and Rumuruti; Narok and Bomet; and Weru, Malindi, and Kilifi; and associated substations.

According to the bank, “addressing the transmission system gaps in the country is a prerequisite for achieving universal electricity access and improving the quality of life of communities through enhanced socioeconomic development.”

“Powering economies requires power for people. We’re working together with the AfDB and Kenya to deliver what Kenyans want and need: reliable power for reliable economic growth – all with green energy that protects the prospects of future generations,” said Neil Wigan, UK’s high commissioner to Kenya.

AfDB’s director-general for East Africa Nnenna Nwabufo said the project is a “major milestone in both sustainable development and the fight against climate change.”

“Kenya is close to achieving universal electricity access with a high component of renewable energy,” she said.

The guarantee is part of Room to Run Sovereign Transactions deal inked between the UK government and the AfDB in 2022, which would see the former guarantee up to $2 billion (Sh320 billion) of the bank’s loans to African countries for climate-related projects. Kenya is the sixth beneficiary of the guarantee programme, after Egypt, Senegal, Tunisia, Benin, and Mauritius.