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Pension fund backing helps get go-ahead for Africa’s biggest wind project

Financing now in place for massive Turkana project in Kenya

Construction of Africa’s largest wind park, a 300MW facility at Lake Turkana in northwest Kenya, will begin now that the project’s developers, including the pension-backed Danish Climate Investment Fund (DCIF), have secured the necessary financing.

The bulk of the funds for the €623m project comes from an array of banks, mostly development finance institutions. They include DEG, a unit of German development banking giant KfW, the African Development Bank (AfDB), the European Investment Bank (EIB) Dutch development bank FMO and France’s PROPARCO.

While the banks had pledged to fully finance the project last March, several details still had to be agreed, notably a loan guarantee that will be provided by Denmark’s Export Credit Agency (EKF). EKF’s guarantee covers a €115m loan from the EIB and a €22m loan from the AfDB for the project.

Along with the bank loans, Lake Turkana is being funded by equity investment, including DKK87m (€11.7m) that has come from the DCIF.

The investment is the DCIF’s biggest since it was launched with seed money from Danish pension schemes PensionDanmark, PKA and PBU. Those schemes provided DKK325m of the DCIF’s DKK525m seed money, with the rest coming from Dansk Vaekstkapital, a private investor tied to Danish pensionfund giant ATP, IFU, the asset manager for the DCIF, and the Danish government (see earlier report).

“Investments by the DCIF, like the one in Africa’s largest wind park, ensure that our members get good returns and that Danish companies (Vestas) benefit,” said Torben Möger Pedersen, CEO of PensionDanmark, in a statement. Pedersen did not quantify the return expected from the investment. However, when the DCIF was launched in January 2014, IFU said the vehicle aimed to deliver a return of 12%.

The facility, said to be located in one of Africa’s windiest spots, will consist of 365 turbines supplied by Vestas, the Danish wind energy firm that is also one of the project developers.

Once completed in 2017, Lake Turkana will account for 20% of Kenya’s power capacity. The operator of the wind park, as well as the overseer of its construction, is Aldwych International, a London-based firm that specialises in developing energy projects in Africa.

As the park’s location is remote, the project developers said 400 kilometres of power lines would be laid down and 300 kilometres of new road built. The developers described the project’s environmental and social impact as minimal, however. For example, they said the local population would only be temporarily displaced during construction. Link to statement from Lake Turkana developers.