Kenyan Media: China Forced Kenya into $9 Billion ‘Debt Trap’ with Coal Plant Deal

Breitbart | 6/12/2019 | Staff
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Kenya’s Daily Nation on Tuesday accused China of forcing the Kenyan government into a “lopsided multibillion-shilling deal for the operation of the Standard Gauge Railway” and using similar strongarm tactics to push Kenya into a “debt trap” coal deal worth $9 billion in U.S. dollars.

The Daily Nation described the coal deal as a “bad project” and “another financial goof”:

Sh900 - US - Capacity - Charge - Lamu

The Sh900 billion [about $9 billion U.S.] will be paid as capacity charge to Lamu Coal owners for connecting their generators to the national grid, and will be due whether or not the plant is in operation and supplying energy to Kenyans.

As a result, experts have warned that building the proposed 981-megawatt (MW) plant in Lamu would be another costly error for the country, and that the taxpayer would be locked into a 25-year power purchase agreement (PPA) that would force electricity consumers to pay more to meet the costs of the project.

Nations - Plants - Energy - Result - Kenya

Most nations have been abandoning coal-powered plants for clean energy, and as a result Kenya has been criticised for embracing coal-powered generators at a cost that adds to a growing national debt, now at $7.3 billion (Sh739 billion), with China being biggest lender.

The article cited a report from the U.S.-based Institute for Energy Economics and Financial Analysis (IEEFA), which called the Lamu coal power plant a “costly mistake” that could cost Kenyan taxpayers billions of dollars even if it never generates any electric power.

IEEFA - Plant - Resources - Alternatives - Energy

The IEEFA charged the coal-fired plant will divert resources from better alternatives for energy generation, locking Kenyans into buying power that costs over ten times what the project’s advocates initially claimed. The project commits Kenya into paying for a large amount of electrical capacity even if the plant fails to produce that much energy or Kenyan end users fail to purchase it voluntarily.

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