Kenya Seeks Investor for Transformer Plant

Filed under: Business,Featured |

An engineer checks a substation in nairobi

The Kenya Electricity Expansion Project, which seeks to bolster the government’s goal of connecting one and half million people and businesses to the electricity grid by 2015, has unlocked several opportunities for investors.

Some of the business opportunities include setting up plants to manufacture and repair transformers. For the government to meet its goals over a five-year period, it will require 60 000 transformers. It is also estimated that an additional 2 000 transformers will require repairs annually.

In addition, there exists a high potential for manufacturing of other related equipment such as switchgears, insulators and electricity energy meters.

The country’s sole power distributor, Kenya Power and Lighting Company, expects a sharp increase in demand for transformer equipment as the government moves to increase connectivity in rural areas. EAC and COMESA trade blocs also offer substantial markets for transformers.

Sector: Access to electricity in Kenya remains extremely low despite the considerable strides that have been made in the past decade. The countrywide access rate (defined as households with a connection to the national power grid) is presently just over 23%. The Kenyan government has set a goal of 40% household access by 2020. Peak demand is estimated at 1 180 MW and is projected to grow at 7% annually over the next 10 years, to reach 2 263MW in 2018.

The demand growth is driven by an accelerated consumer connection policy and anticipated robust economic growth performance. The projected growth rate in demand will require corresponding increases in capital outlay to provide the needed incremental generation capacity and associated supply and distribution infrastructure.

The high cost of, and limited access to, energy has held back business and development in Kenya. Launched in October 2010 and supported by the World Bank, the Kenya Electricity Expansion Project is expected to facilitate the new distribution lines, which will particularly enhance agricultural productivity.

Investing in Kenya

Kenya is East Africa’s most important economic centre and has an all-rounded economy ranging from communications, trade in industrial and agricultural goods to financing.

It is likely to remain an important and influential market with considerable potential for further growth in the next few years.

However, this would depend on the country’s ability to weather the main risks for the economy, which include high inflation, structural challenges in the economy, high tax rates and burdensome custom procedures, infrastructural deficiencies in rail and electricity, corruption, and political uncertainty.

Its reliance on agriculture, and Europe as an export market could be minimised by the expected growth in disposable income and increased urbanisation, which will result to more expenditure on communications, education, health, recreation and transport. This is already happening, according to a 2011 report by consulting firm Deloitte, which noted a sharp increase in sales of cars, mobile phones and other expensive consumer durables.