Oct 08, 2007 - East African Business Week/All Africa Global Media

The Eastern Africa power connectivity plan may not take off unless Zambia, the main supplier in the interconnection project, demonstrates its capacity to generate more power for distribution to Kenya and Tanzania.

Kenyan officials have developed cold feet over the multi-million dollar electricity deal whose construction work is billed to begin in 2011 after the completion of a series of feasibility studies, including environmental audits and its financial viability studies.

Kenyan Energy Permanent Secretary, Mr. Patrick Nyoike says getting guaranteed funding for the power connector has between a challenging ballgame in the absence of clear assurances that the Zambian energy authorities would meet the supply demands.

"We cannot talk about financing until there is adequate power," Nyoike told East African Business Week in an interview in Nairobi.

The African Development Bank (AfDB) has expressed willingness to meet some financial obligations of the US$670 million project.

The project hopes to raise some 330 kilovolts. The bank said in a written interview that the Zambia-Tanzania-Kenya power project was at an advance stage.

Dr. Ini Urua, the Divisional Manager for the New Partnership for Africa 's Development (NEPAD) at ADB said the planned power pool was at the financing stage after the completion of the feasibility studies.

He said the NEPAD division was in the process of mobilising for funds to assist in the implementation of the project, which he said has a high potential for improving regional economic ties for the three African states.

Kenya, Tanzania and Zambia have been negotiating on modalities of tapping additional electric power to shore up additional electricity demands in their own countries.

In March this year, the three states agreed to set up a Project Management Unit to oversee the implementation of the power project and stationed its offices in Lusaka, Zambia.

The three states have also identified transaction advisors for the project but minute implementation details and the doubts expressed by the Kenya authorities over the power project's generation capacity have overshadowed these developments.

The project was first mooted in 1999 but has dragged on over disagreements over the price of power, a fact which made Kenya to initially withdraw from the project.

Kenya risks an acute electricity shortage as power consumption and the need to frequently upgrade its hydropower stations at the Seven Folks scheme puts pressure on the generation capacity, raising the potential for power rationing ever higher.

Kenya Electricity Generating Company (KENGEN) Managing Director Eddy Njoroge confirmed that the government of Kenya was still pursuing the Zambia-Tanzania inter-connector but was much more concerned about the supply constraints.

"We are not even sure that the Zambian inter-connector will meet the demand," Njoroge told East African Business Week in Nairobi.

Senior accounting officers from the ministries of energy from the respective participating states have held a series of meetings to discuss the intricate details of the project.

The Kenyan energy ministry is also implementing ambitious rural electrification projects aimed at connecting more than 120,000 new users every year.

Tanzania, its next-door neighbour which is still reeling from the after-shocks of a prolonged electric power rationing caused by rapid economic expansion, also plans to increase pressure on its national power grid by connecting additional six million people by 2013.

Dar es Salaam hopes to get at least 75,000 new users on the national grid annually to increase electricity consumption to 1,100 Megawatts over the next two years.

Zambia is trying its level best to win the backing of key financiers to put up enough power for sale to the two countries.

However, Zambia, which has also faced electricity shortages in the past, hopes to sell its extra power to the Eastern Africa neighbours, which are facing possible shortages due to robust economic growth, which has left Kenya in particular, vulnerable to shortages.

Kenyan officials say they would be more comfortable if the Zambian pool was connected to the South African pool to guarantee continued supply to both countries.

Zambia has created a new Office for the Promotion of Private Power Investment (OPPPI) to discuss with the World Bank over the plans to shore up the country's electricity generation to meet the demand for power regionally.

Zambia's Energy and Water Minister Felix Mutati told a recent ministerial conference in Livingstone-Zambia's second city-that plans are underway to increase the power generation through the expansion of three power projects in the country.

The Southern Africa state hopes to increase power distribution by expanding the Lower Kafue Gorge to produce additional 750 Megawatts.

China has also emerged to save the Zambian power woes with a promise to inject US$260 million for the Kariba extension project, which is expected to generate 360 MW. A Chinese firm, Sino Hydro, is still evaluating the technical proposals for the project.

The ADB, which has been most vocal about the Zambia-Tanzania-Kenya interconnector, says regional projects are much more technical to operate and may face constraints, especially related to management at national levels.

"Regional infrastructure development be it in electricity interconnection, boundary water resource management or trans-border transport networks such as road, rail, maritime, and air transport, is a very complex activity that transcends all phases of project development," Urua explained.

He said these projects are complex from early stage project development through achievement of financing, delivery of the infrastructure asset, putting in place the right institutional framework to management the infrastructure asset, to highlight a few.

"Given limitations on concessional financing window of the Bank, the Bank has done well in supporting the design, development and implementation of key infrastructure projects," Dr Urua added. Development institutions that support the development and delivery of infrastructure are usually faced with the issue of implementation capacity at the country level.

"This is sometimes as a result of the commitment of recipient countries to the project and sometimes due to acute shortage of local personnel. Incorporation of capacity building elements in project design is often used to ameliorate this," Dr Urua explained.

Kenya's waning interest on the inter-connector might delay the multinational financing of the project since NEPAD financiers are keen on projects that go beyond boundaries of a single state. "Nobody would give you money to construct a line if you are not sure you will have power on the same line," Nyoike said.

Kenya is banking on a cost-benefit survey that its officers are undertaking to finally make the decision on whether to press on with the regional inter-connection project.

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