The African Development Bank (AfDB) has exited a multi-billion shilling renewable energy project in Nairobi’s Kibera slum due to repeated delays in the procurement of services to kick-start the project.
The continental lender had in January 2018 awarded Asticom Kenya Limited a grant of $995,000 (Sh128.8 million at current exchange rate) for the 12 MW Kibera waste-to-energy plant.
The Bank, through its Sustainable Energy Facility for Africa (Sefa), has launched part of the grant to enable the project to become bankable in order to attract additional investors. However, the project never started due to repeated delays in procurement.
Since the grant was awarded nearly six years ago, Asticom has been able to complete only one of the three required deliverables, forcing the lender to cancel the grant after awarding the company an initial amount of Sh16.8 million, or about 13 percent of the total amount. .
“The project did not succeed in reaching financial close, and therefore engaging the bank after preparation and providing the bank’s private sector window to play a leadership role in the debt financing/investment phase of the project was no longer relevant.” The lender said in the project completion report published on Friday.
“The grant ended before all activities were completed due to numerous procurement-related delays.”
The funding from the African Development Bank, which is in addition to a Sh1.6 billion ($12.7 million) grant the company received from the UN Climate Technology Initiative (CTI), was intended to help it with the initial construction phases and realize it before it is ready. Able to attract additional investors.
These funds were intended to cover the costs of the Environmental and Social Impact Assessment (ESIA) report, the detailed engineering design of the plan, the business plan and financial model, and legal documents.
But by the time the grant expired at the end of 2019, Asticom had only been able to appoint a contractor to develop an environmental and social impact assessment report, which had not yet been approved by the National Environment Management Authority (NEMA) as of last December. year. The other three desired outcomes have not yet begun.
“None of the outcomes were fully achieved, and only one was partially achieved. This was due to procurement issues,” the African Development Bank said in the completion report.
“In hindsight, it appears that the project sponsor did not have the required purchasing power and was not sufficiently familiar with the bank’s rules and procedures.”
While the bank could have extended the grant deadline to allow Asticom to implement the said deliverables, it decided not to do so due to the “problematic sponsor (company), and the breakdown of the professional relationship and trust between the sponsor and the bank.”
“Wrong assessment”
Had the Kibera plant been launched, it would have been Kenya’s first waste-to-energy power plant, marking a major milestone in the wake of the menace of urban waste and climate change threats, which may now no longer be achievable in the foreseeable future.
The plant was supposed to generate 10 megawatts of power at full capacity by 2021, create at least 250 jobs, and reduce Kenya’s greenhouse gas emissions by 315,000 tons of carbon dioxide equivalent by 2022.
It would convert municipal solid waste, crop residues and livestock waste into biogas fuel and use it to generate electricity.
According to the African Development Bank, it was supposed to “contribute significantly to sustainable economic growth by providing renewable energy or energy at a competitive cost.”
While the entire project fit into the lender’s then-10-year strategy, the country’s strategy paper, and Kenya’s Vision 2030, the bank now admits it misassessed the company’s ability to deliver the project, as it assumed it could since it had recently done so. It received a Sh1.6 billion grant from CTI.
The bank said: “This experience confirms the importance of conducting a comprehensive and correct assessment of purchasing capacity before approving the grant.”