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KENYA

1. Overview

a. Country Information

Population 46.05 million
Population growth rate 2.6%
GDP $63.40 billion
GDP Growth rate 5.7% (2013) 5.3% (2014) 5.6% (2015) 6.0% (2016 est) 6.1%
(2017 est)
Electrification rate 23% (2012 est)
Source: World Bank, 2015 IMF, 2015.

Kenya boasts a steady economy, the most liberal in East Africa. Supported by a relative political
stability, the country is slated to strengthen its position as the regions economic powerhouse.
Todays challenges, including facing Somalias Al-Shebab threat, high unemployment rate and
persistent poverty, are being dealt with serious measures and plans.

Kenya plays a central role in East Africa as the largest economy and a gateway into the
region. The economy is diversified and the financial sector strong, with deep and developed
domestic debt markets.

According to the October 2015 Kenya Economic Update, Kenya is poised to be among the
fastest growing economies in Eastern Africa. Besides, the 2016 Country Economic
Memorandum says that Kenyas growth prospects will depend a lot on Innovation, Oil, and
Urbanization on the long term. (World Bank, 2016).

Development Context

Kenyas economic growth is conditioned to the even steadier development of its infrastructure and
industry. In 2011, less than 20% of the population had access to electricity, and the grid network
remains weak. The country has therefore implemented in 2006 the Kenya Vision 2030 plan, which
aims to transform Kenya into a newly industrializing, middle-income country providing a high
quality of life to all its citizens by 2030 [] in a clean and secure environment.

In the energy sector, as an example, it is reflected by a 3,400km extension plan of the HV grid, and
by a tenfold increase of the electrical production capacity up to 19GW, prioritizing low-carbon
energy sources.

Kenya has the potential to be one of Africas great success stories from its growing and
youthful population, a dynamic private sector, a new constitution, and its pivotal role in East
Africa. Addressing challenges of poverty, inequality, governance, low investment and low
firm productivity to achieve rapid, sustained growth rates that will transform the lives of
ordinary citizens, will be a major goal for the country. (World Bank, 2016)

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b. Investment Framework

General

Kenya is a member of the World Trade Organization and the International Centre for Settlement
of Investment Disputes.

2013 2014 2015

FDI (US$ Million) 372 944 1,437
FDI (% of GDP) 0.7 1.5 2.3
Source: World Bank, 2015

Foreign Direct Investments have soared since 2013. The main sectors benefiting from this massive
rise of the foreign investments are agriculture, real estate, banking, tourism and infrastructure
(telecommunication, transports, energy).

Financial and Taxation.

The Kenyan Shilling is a convertible currency used. There is no particular regulatory framework on
foreign exchange repatriation.
According to World Bank, the inflation rate reached 6.6% in 2015.

The Government has approved a zero-rated import duty and removed Value Added Tax (VAT) on
renewable energy equipment and accessories (Ministry of Energy, 2012).

Corporate Income Tax 30% for resident companies ; 37.5% for

non-resident companies.
Taxation on dividends 5% for residents ; 10% for non-residents.
Tax on Management and Technical Fees 20% when provided by a non-resident
company
Taxation on interests 15%
VAT 16%
Source: EY Worldwide Corporate Tax Guide 2016, Deloitte Guide to Fiscal Information 2015/16

Doing Business Ranking

2016 2015
Doing Business Rank 108 58.24% 129 53.60%
Starting a Business 151 148
Dealing with Construction Permits 149 152
Registering Property 115 121
Protecting Minority Investors 115 114
Enforcing Contracts 102 102
Ranking is out of 189

Land Property

Land in Kenya belongs to private landowners who can be individuals or communities. Land is
managed at the County level but the projects authorizations are given at the Ministry level.

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Proper management of land and social topics is crucial to the success of a project. Failure in
securing land property and local population agreement can result in stalling a project, such as in
Kinangop wind project case.

2. Energy Sector

a. Regulatory Status

As of 2013, the power generation was shared between private IPPs (30%) and the State company
KenGen (70%). They sell their electricity to the state-owned Kenyan Power (formerly KPLC) who sells
it to consumers through the KETRACO distribution network.

The country has a long history with IPPs, firstly in the thermal power sector, which flourished in the
mid- 90s.

PPAs for renewable installations were introduced in 2008, and are based on the Standardized
Power Purchase Agreement for generators greater than 10MW, set by the Ministry of Energy in
the Feed in Tariff policy5. A similar standardized PPA exists for generators smaller than 10MW.

The feed in tariff for wind and solar energy is established at 0,11 USD$ / kWh for 20 years,
including a 12% variable O&M portion indexed on the US Consumer Price Index.

The projects are selected through an expression of interest framework. This will change to a
system of auction that will enter into force starting from August 2017.

b. Price of Energy

The electricity sold to final customers through the distribution network is priced from $0.13/kWh to
$0.21/kWh.
For Commercial and Industrial users (connections in the range of 415V 132kV), the energy charges
range from $0.07/kWh to 0.09/kWh. These users accounted for 57% Kenya Power in 2015.

c. Grid Infrastructure

As of 2015, the peak power demand was estimated at 1,9GW, and the installed power capacity
at 2,2GW. During low-hydrology season, the power generated cannot meet the demand. This
demand is projected to grow to 15GW by 2030, mainly due to extension of the electrification of the
country and the soaring-up of industry and cities.

Thermal energy is expensive and hydropower is limited for environmental and seasonal reasons.
Thus, the share of renewables other than hydropower will thrive from the current 14% to 35%
in 2030.

The grid, built and managed by KETRACO, covers the southern part of the country and the coast,
where population is highly concentrated in the major cities. In general, the power supply quality
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remains weak due to power cuts. Besides, several zones do not have access to grid-connected
power supply. Therefore, off-grid solutions are widespread in the country, be it due to an isolated
location or to provide a continuous electrical service.

Parallel to the grid connected infrastructure, it is estimated that 18 micro-grids are installed in
Kenya and operated by Kenya Power, totalling a generation capacity of 19MW. Out of these
systems, two are wind-powered and six are solar-powered.

Additionally, more than a dozen micro-grids are being developed.

Effective Kenya Vision

% Effective
Capacity MW 2030
2015
2015
Hydro 800 35.7 1,000
Geothermal 579.9 26.0 5,100
Thermal (All) 785.5 35.1 6,035
Wind 25.5 1.1 2,036
Cogeneration 21.5 1.0 n/a
Interconnected System 2,210 98.9 19,220
Off grid (All) 24.0 1.1 n/a
Imports - - -
Total Capacity MW 2,234 100.0 19,220

Global Electricity Transmission has analyzed the pipeline of upcoming projects and has drafted
the following forecast of yearly consumption, production, and installed capacity.

Observed Installed Electricity Capacity (MW) and Growth in electricity generation and
consumption.

Source: GETR report, 2016

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Expected addition to generation capacity (MW) in the timeframe 2016-2025 and Expected
growth in electricity demand (GWh).

Source: GETR report, 2016

Source: Kenya Energy Regulatory Commission

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3. Renewable Energy Profile

Around 73% of the total areas of the country are experiencing wind speeds of more than 6 m/s at
100m above ground level.
Kenya is endowed with a huge wind energy potential capacity of 1.604 GW in Class III winds, 642
GW in Class II, and 4,6 GW in Class I.

Source: IRENA DTU Wind Atlas

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