Kenya’s energy sector faces a significant transformation as the government seeks new partners to fund its infrastructure projects following the abrupt termination of the Adani Group deal. The Ministry of Energy, under Cabinet Secretary Opiyo Wandayi, is looking to secure financial backing from a mix of public-private partnerships (PPPs) and international development organizations to modernize the country’s electricity infrastructure. This shift in approach comes after the collapse of a Sh260 billion agreement between Kenya and the Adani Group, which was originally set to modernize key energy infrastructure projects, including the Jomo Kenyatta International Airport (JKIA) and critical power transmission lines.
The Adani deal was an ambitious project that included the construction and operation of power transmission lines and substations, aiming to address persistent power blackouts and enhance Kenya’s power capacity. The contract with Kenya Electricity Transmission Company (KETRACO) involved four transmission lines and two substations. These projects would have spanned hundreds of kilometers, strengthening the power grid to ensure greater stability and capacity for growing demand. The termination of this deal, as ordered by President William Ruto in November, has left a gap in the country’s energy infrastructure plans.
Opiyo Wandayi, however, is optimistic about the future. Speaking at a media briefing ahead of the Eastern Africa Power Pool (EAPP) Regional Trade Conference 2024, he emphasized that Kenya’s energy ministry is committed to addressing gaps in energy generation, distribution, and transmission. The ministry is actively exploring new ways to enhance the sector’s infrastructure by leveraging a combination of PPPs and funding from development partners. Wandayi affirmed, “We shall continue to explore PPPs in terms of strengthening and improving our power infrastructure.”
A central part of the ministry’s new strategy is the pursuit of lifting the moratorium on Power Purchase Agreements (PPAs), which has been in place since 2021. Initially imposed by former President Uhuru Kenyatta’s administration, this ban was intended to allow the vetting of existing Independent Power Producers (IPPs) and their PPAs. The National Assembly, however, blocked the lifting of the moratorium in the past, citing the need for further inquiry into PPAs and to find ways to reduce Kenya’s electricity bills. Despite this setback, the Energy Ministry remains in continuous dialogue with lawmakers to find a way forward.
The regional power trade, a significant development in East Africa, is also a driving force behind the government’s efforts. Under the Eastern Africa Power Pool (EAPP), which encompasses 13 member states, Kenya hopes to increase electricity production and distribution in preparation for cross-border energy transmission and trade. This initiative aligns with President Ruto’s vision to establish Kenya as a key player in regional energy trade, which is expected to boost energy access across the region and stabilize prices.
To achieve these ambitious goals, the Kenyan government is exploring partnerships with major international development organizations that have expressed interest in the country’s energy sector. Key players include Power Africa, a public-private initiative spearheaded by the US government that provides grants, financing, and technical support to African energy projects. Other prominent partners include the African Development Bank (AfDB), the World Bank, the German Development Bank (KfW), the United Nations Development Programme (UNDP), the European Investment Bank (EIB), and the United States Agency for International Development (USAID). These organizations offer both funding and expertise that will be crucial in helping Kenya revitalize its power infrastructure.
Furthermore, the Japanese International Cooperation Agency (JICA) and other global entities like the United Nations Environmental Programme (UNEP) are expected to play a role in sustainable energy projects, especially as Kenya works towards expanding its renewable energy capacity.
Despite the challenges posed by the Adani exit, Kenya’s energy sector remains an attractive investment opportunity. The government’s shift to engage new partners and revive the PPA process signals a renewed commitment to modernizing the energy grid, ensuring stable electricity supply, and securing regional energy trade. The next few years are critical for Kenya as it aims to overcome infrastructure challenges and establish itself as a leader in East Africa’s energy sector.
