On November 22, 2018, the Government said it was preparing to pay Sh9 billion to buy out the owners of three diesel-fired power plants in a move aimed at reducing the cost of electricity generation.
The plan was presented as part of a broader push to shift Kenya toward cheaper sources of power, including geothermal and wind, which officials said were becoming more important as installed capacity rose.
But the proposal also carried a heavy cost for taxpayers. The State said earlier efforts to unwind expensive thermal power arrangements had done little to ease consumer prices, and this latest exit would again require public money.
Energy Cabinet Secretary Charles Keter told the Senate Energy Committee at Parliament Buildings that ending the contracts for the remaining thermal plants would be far more expensive. He said there were seven such plants in total, and terminating those agreements would cost the country Sh67 billion.
“Instead of paying them, we would rather leave them to operate for the contract period and only buy power from them when we need it. Paying for power that they generate during the period would be cheaper,” Mr Keter told the committee.
He said the three plants were the only ones for which termination appeared financially manageable, but even that step would only happen after Cabinet approval. According to Keter, the Energy Ministry was working with the National Treasury on a task force report before taking the matter to Cabinet.
“We are working with the National Treasury on the task force report and then take it to the Cabinet for approval. After that we can make a decision to terminate,” he said.
The government’s argument was that Kenya could meet demand with minimal reliance on thermal generation, but it could not simply cancel the contracts without paying the agreed exit costs.
That position came as the country’s installed capacity climbed to about 2,700MW after the addition of 310MW from the Lake Turkana Wind Power project and another 55MW from the Garissa Power Plant.
Despite the new capacity, the thermal sector remained expensive to unwind. The figures cited by the ministry showed the State was weighing a limited buyout for three plants against a much larger bill if it tried to end the other contracts as well.
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