WASHINGTON, June 25 -- The Multilateral Investment Guarantee Agency, a member of the World Bank Group, issued the following news release:
The Multilateral Investment Guarantee Agency (MIGA), the political risk insurance and credit enhancement arm of the World Bank Group, announced today that it is continuing its support for Kenya's energy sector by insuring a non-shareholder loan to independent power producer (IPP) Gulf Power Limited. Gulf Power is one of a series of IPP plants being developed by the government of Kenya and supported by the World Bank Group with the aim of rapidly building up the country's power generation capacity.
The 80-megawatt heavy fuel oil plant located approximately 20 kilometers from Nairobi will complement the country's energy mix. Gulf Power will sell electricity to Kenya Power, the national transmission and distribution company, for 20 years under a power purchase agreement. Earlier World Bank Group support to the project includes "A" and "B" loans from the International Finance Corporation (IFC) and a partial risk guarantee from the International Development Association.
MIGA's coverage of $27.9 million to Standard Bank of South Africa for its non-shareholder loan is against the risk of war and civil disturbance for 15 years. This project marks the first time that a MIGA guarantee will be issued to a participant in a B Loan arranged by the IFC. MIGA's guarantee provides the syndicated lender with assurance of compensation in the event the project enterprise defaults on its repayment due to war or civil disturbance events.
"Kenya's power sector needs over $5 billion of new investments by 2015 for electricity generation alone," says says Stefania Berla, Director, Syndicated Loans and Management, IFC. "Our collaboration with MIGA is helping lenders get comfortable with the risks, and ultimately delivering a diversified energy mix to meet the huge demand for power generation."
Gulf Power is the fourth IPP in Kenya to benefit from a combination of IFC financing, IDA partial risk guarantees, and MIGA's political risk insurance. Together, these IPPs are expected to add nearly 300 megawatts to the grid.
"MIGA's ability to extend long tenors is playing an important role in helping countries attract investment into capital-intensive projects such as power plants," says Keiko Honda, MIGA Executive Vice President and CEO. "Our ongoing support to Kenya's energy sector is a strong demonstration of how the agencies of the World Bank Group can mobilize significant volumes of private sector investment to provide an essential service."
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