By Mark Ford

Kenya's attempts to diversify its energy sources are being stalled by the government's inability to provide the letters of credit (L/Cs) required by Independent Power Producers (IPPs).

Kenya is currently over reliant on hydropower, which can be adversely effected by unpredictable weather conditions.

Five plants

Kenya currently has five power projects on hold because financing arrangements have not been finalised.

These include a wind farm, an extension to a geothermal power station and three diesel plants.

L/C requirement

The developers of these projects have asked the Kenya Power and Lighting Company (KPLC) to issue irrevocable standby L/Cs to cover the eventuality of non-payment under the agreement between the IPPs and the state-owned electricity firm.

But KPLC's balance sheet is already overburdened, and it has told the developers it cannot provide the US$200 million of L/Cs they have asked for.

The state-owned company is already maintaining standby credit facilities for several IPPs operating in the country.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.