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The Olkaria III geothermal power station was built using a phased approach. There were two ways that its development was carried out using a phased approach. First, the Olkaria field was developed using a phased approach, and, second, the power station itself was built in three phases. As indicated by its name, the Olkaria III power station was the third power station build in the Olkaria field in the Rift Valley. Its nearby sister stations, Olkaria I and Olkaria II, were built and operating prior to the development of Olkaria III power station. This reduced the risk of developing the Olkaria III power station, because it provided additional information on the geothermal resource and also proved that the geothermal resource was commercially viable. Olkaria III power station was also developed with a phased approach. Originally, the project was to develop a power station with an installed capacity of 13 MW and then increase the installed capacity of the power station to 48 MW by 2009.80 This expansion was carried out as planned, and then OrPower4 expanded the plant further to 110 MW in 2014. This phased approach reduced the risk faced by OrPower4 because OrPower4 was able to develop and study the geothermal resource, and work with the Government of Kenya before making additional investments. The second notable aspect of the project is the active role that multilateral development banks had in all aspects of the project: the World Bank supervised the procurement of the project, and various multilateral development banks provided significant financial support for the project.81 Multilateral development banks provided financial support through concessionary financing and through a guarantee. Donors provided significant financing for the first 48 MW of the power station and the expansion to 110 MW. The first 48 MW of the power station cost US$179.4 million. OrPower4 contributed US$59.7 million as a long-term commercial equity contribution, and the remaining balance was financed with long-term loans from various development finance institutions.82 The expansion of the power station to 110 MW was financed by multilateral development banks. The Overseas Private Investment Corporation (OPIC) provided OrPower4 with a US$310 million debt facility for this expansion.83 Another key way that multilateral development banks and donors provided support is through providing a guarantee for the project. The Multilateral Investment Guarantee Agency (MIGA) of the World Bank Group provided OrPower4 with a guarantee of up to US$98.1 million in 2008. This guarantee lasts for 15 years and covers the risks of war and civil disturbance, transfer restriction, and expropriation.84 The guarantee from 2008 replaced a guarantee provided in 2002 for US$70 million, which only covered the first phase of the project.85 80. World Bank, “Kenya Private Sector Power Generation Support Project,” accessed November 6, 2014, http://www.worldbank.org/projects/P122671/partial-risk-guarantees-ipps-kenya?lang=en. 81. Private Infrastructure Development Group, “Olkaria Geothermal Power Plant,” accessed November 6, 2014, http://www.pidg.org/impact/case-studies/olkaria-geothermal-power-plant. 82. Private Infrastructure Development Group, “Olkaria Geothermal Power Plant,” accessed November 6, 2014, http://www.pidg.org/ impact/case-studies/olkaria-geothermal-power-plant; World Bank and UNDP: Climate Finance Options, “DEG/KfW Olkaria III Geothermal Power Station (Kenya),” accessed November 6, 2014, http://www.climatefinanceoptions.org/cfo/node/67 (no longer available). Financing for the project was arranged by Deutsche Investitions- und Entwicklungsgesellschaft mbH (DEG). DEG and KfW Entwicklungsbank (KfW) provided approximately 35 percent of the remaining balance. Other donors who provided long-term loans were Netherlands Development Finance Company (FMO), European Development Finance Institutions (EFP), Proparco, and The Emerging Africa Infrastructure Fund (EAIF). 83. Ormat, “Olkaria III Geothermal Complex in Kenya Reaches 110MW with Commercial Operation of Plant 3,” accessed November 6, 2014; Ormat, “Ormat Technologies Signs Long-Term Debt Financing for up to $310 Million for the Olkaria III Geothermal Power Complex in Kenya,” accessed November 6, 2014, http://www.ormat.com/news/latest-items/ormat-technologies-signs-long-term- debt-financing-310-million-olkaria-iii-geotherm. The OPIC loan had three tranches. The first two tranches provided US$265 million and a maturity of 18 years. This amount was to fund the expansion of the plant to 84MW. There was also a standby tranche of US$45 million if OrPower4 decided to increase the capacity beyond 84MW. 84. MIGA, “Project Brief: Fortifying Power Investments,” accessed May 23, 2016, https://www.miga.org/Documents/power08.pdf. 85. MIGA, “MIGA Sees Solid Results in FY02,” MIGA News 10, no. 2 (April–June 2002), accessed May 23, 2016, https://www.miga.org/Documents/vol10no2.pdf. 45PDF Image | Unlocking Geothermal Power Eastern Caribbean Powerhouse
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