COVER PAGE
Report on the Geothermal Projects Development in East African Countries ofDjibouti, Ethiopia, Kenya, Rwanda, Tanzania and Uganda: Opportunities forPrivate Investments and Public Private Partnerships___________________________________________________________________________
This study was undertaken by Asia External Representation Office of African Development Bank (AfDB)
in partnership with UNIDO to elaborate and identify tangible options and windows of opportunities
for attracting private sector finance and for promoting non-sovereign projects in the field ofgeothermal industry including mobilizing private financing through Public-Private Partnership (PPP).
The Asia External Representation Office of AfDB initiated this effort to encourage Asian investors toparticipate in the African Geothermal industry. This report was prepared to highlight the abundanceof geothermal resources in East Africa but only limited development has so far been undertaken in
the countries of Djibouti, Ethiopia, Kenya, Rwanda, Tanzania and Uganda. Whereas the targeted six
east African countries have a large population of more than 298 million as of 2020, only about 12 GW
is generated of which about 63% is from renewable energy source comprising hydropower, solar andwind systems. Per capita consumption has remained very low of between 55 and 200kWhr compared
to global average of more than 21,000kWhrs in 2021. Part of the causes of low consumption is low
generation and lack of adequate transmission infrastructure. The targeted countries have pledged toincrease generation from renewable energy sources as part of climate change mitigation. Geothermal
resources have been highly ranked for development in the targeted countries.

Djibouti
Ethiopia
Kenya
RwandaTanzania
UgandaTotal

Population2021(Million)
1.1
120.3
53.1
13.5
63.6
45.9
297.5

Generation
capacity
(MW)
164
5275
3037
276
1898
1259
11,909Penetration
rate (%)

RE total (%)

65.4
54.2
75
74
43
49

26
98
78.7
49
33
90
9,497 MW

Geothermal
Generation%
0
0.16
29.9
0
0
0
940 MWPer capita
KWhr
55
95
200
73
136
75

Geothermal resources widely occur in the targeted countries of Djibouti, Ethiopia, Kenya, Rwanda,
Tanzania and Uganda but only a small fraction has been developed due to many challenges that
include lack of supportive regulatory and fiscal environment in some countries, inadequate technology
and training and lack of financing. However, it is known that high temperature, volcano hosted
geothermal resources are located within the eastern branch of East African Rift System while thewestern branch of EARS has mainly medium temperature, fracture controlled geothermal resources.
High temperature geothermal systems have been proven in Kenya, Ethiopia and Djibouti while surveys
to identify reservoirs for the resources in the western branch are ongoing with surface studies which
will give way for exploratory drilling in the selected sites. It has been estimated that about 20 GW canbe developed in East Africa for power generation.Overall, the targeted countries intend to develop
more than 5,000 MW of geothermal power projects by year 2035 alongside several direct use projects.
Most of the developments are expected to be undertaken in Djibouti, Ethiopia, Kenya and Tanzania
where exploration drilling is currently in progress. Rwanda and Uganda are re-evaluating theirgeothermal systems using a new approach suitable for evaluation of fracture controlled geothermal
systems and there is high probability for successful results. East Africa has experience in PPP financing
for geothermal projects with important examples being the 155 MW Orpower4 plant and 105 MW
Menengai projects in Kenya and the Tulu Moye project in Ethiopia.

1|PageDevelopment of all the geothermal projects in the targeted countries will require financing of morethan US$ 20 billion over the next seven to twelve years for the 2030-2035 target to be achieved. The
required capital for the projects is expected to come from both public and private and PPP financing.
Kenya is developing the 100MW Paka project for PPP financing while Tanzania is planning to use PPP
model for the development of the Ngozi geothermal project once the planned exploratory drilling
confirms a resource. Several geothermal projects in Kenya, Ethiopia and Uganda have also been put
on track for PPP development and will be open to international participation. Both verticallyintegrated and separated PPP models have been successfully used to finance geothermal projects in
Kenya and Ethiopia and the new projects are likely to be a mix of the two models.
The East Africa region is one of the fastest growing geothermal market in the World and therefore,
opportunities exist for private investors and financiers to engage with the targeted countries of East
Africa to develop the geothermal resources for power generation and direct applications. The private
developers can be engaged through PPP processes from early stage green field development throughappraisal, feasibility studies, power development and operations and supply of generation equipment.
Licensing procedures are well developed in Kenya and Ethiopia and are under development in theother targeted countries. Some specific case studies are described below and covered in greater detailin the fact sheets.
Djibouti: Exploration wells drilled in Asal, Gale La Koma and Fiale Caldera have proved the existenceof high temperature geothermal system despite the challenges of high salinity, temperature inversion
in the wells and low permeability in the reservoir. Private sector technology companies andexperienced geothermal project developers are invited to help develop these complicated reservoirs.
Greenfield projects are also available in Djibouti including Hanle - Garrabayis, Lake Abhe, North–
Ghoubhet, among others. Good returns on investment are expected for the projects since the country
offers competitive PPAs for renewable energy projects.
Ethiopia: Is one of the countries with the highest geothermal potential in Africa spanning the entire
length of the rift. Ethiopian Electric Power (EEP) is currently focused on development of AlutoLangano project to power generation phase. Tulu Moye and Corbetti prospects are committed todevelopment by private sector. All the other twenty-six identified prospects including the Greater
Tendaho geothermal field are open for new private investment in partnership with EEP or private
license holders who are actively engaged in some of the projects. Most of the prospects have highpotential for success and are within close distance to power grids. Development cost is expected to
be low since EEP has drilling rigs in Ethiopia that can be rented for the projects.
Kenya: Kenya is currently the fastest growing geothermal market in Africa and presents the mostsuccessful geothermal PPP projects as well. Whereas the public sector through KenGen currently has
the highest installed capacity, generation by private sector using PPP is rapidly increasing withcurrently installed capacity of 190MW and expected to grow by another committed 70MW
(Menengai) by 2025 and by another 200MW (Olkaria) by 2026. GDC has opened up Paka geothermal
field for 100MW, PPP project due to be tendered in 2024. GDC is also planning to initiate drilling at
Paka and Suswa and which will also be available for PPP financing. There are also several geothermal
exploration licenses that have been issued to private developers and which have not made progress
due to many challenges including lack of financing for exploration drilling. These projects therefore
avail opportunities for new equity investors to inject new capital into the projects.
Rwanda: Geothermal activities in Rwanda slowed down after the drilling of two dry geothermal wells
in Karisimbi in 2013-2014. Subsequent technical review recommended a different approach toevaluating resources in the western branch of EARS being fault controlled geothermal systems.
Studies are ongoing following the new guidelines. However, it has been established that the prospects
2|Pageare low to medium temperature and likely to have small reservoirs suitable for modular ORC power
generation and direct use applications. The Government of Rwanda is open to private sector
involvement in the projects even though there is no specific law guiding private sector entry into
geothermal projects.
Tanzania: Geothermal activities took a more aggressive path from year 2012 when TGDC wasestablished to fast track exploration and development of geothermal resources in the country. The
best-known site in Tanzania is the Ngozi geothermal prospect that has been modelled as hightemperature. Exploration drilling of three slim-holes will commence in year 2023 and if a geothermal
reservoir is identified then an IPP will be selected to undertake further appraisal and production
drilling and construct a power plant in phases of up to 200MW. Kiejo-Mbaka prospect will also haveslim-holes drilled in 2024. TGDC is currently receiving “expression of interest” from interested IPPs
for consideration. The other sites in Tanzania including Lake Natron, still require detailed surface
studies before the private sector is invited to show interest in any of them for the development of thesubsequent phases.
Uganda: Uganda is developing a geothermal policy and act that would guide geothermal projects
development in the country. The geothermal sector has participation of both the government andthe private sector. Experts in Uganda have embraced the new exploration approach for the
exploration of geothermal systems in western branch of EARS with good results. It is anticipated that
viable projects will be identified in the near future. The country has also licensed private developers
for both power and direct use. Investors are required to undertake subsequent phases of the projects,
particularly Kibiro, Buranga and Panyimur prospects.
Based on the baseline review and the analysis of existing projects from a perspective of a PPP
combined with the results of stakeholder consultation, four main challenges for accelerating PPP
geothermal project in the targeted countries were identified. Several key recommendations are also
proposed to address these main challenges.
Challenge #1: Clarity on regulations governing geothermal development and pricing process forgeothermal power
Unclear definitions and regulations regarding ownership of geothermal resources, types ofdevelopment licenses, licensors, licensees and delineation of development areas can be a factor that
undermines business predictability and continuity for geothermal developers. In several countries in
the region, laws and regulations for geothermal resource development are underdeveloped and/or
unclear, which limits the entry of private developers. In addition, the process of pricing electricity
generated by geothermal resources is not standardized or transparent in several countries. This also
poses a risk to private developers and could be a barrier to the growth of IPP projects.
Recommendations:(a) Develop geothermal law for clear and transparent ownership, licensing and administrative
procedures
A clear and transparent ownership, licensing and administrative procedures for geothermal
exploration or development in accordance with geothermal law are important to attract private
developers and investors. This law will give certainty and reduce risks for investors and developers bymaking licensing and administrative procedures predictable in terms of cost and timeline. A clear
ownership of geothermal resource will avoid conflict between geothermal developers andlandowners. In addition, transparent procedures also will prevent the private sector from doing an
act against law such as bribery. It should be noted that the capability of central and local/regional

3|Pagegovernments to carry out geothermal law is also important to make sure the law is well implemented
in the field.
Kenya enacted Geothermal Resource Act in 1982 (Repealed). This law clearly defines geothermal
resource and set out in greater detail on the ownership of geothermal resource, the application
procedure for both the exploration authorization and the geothermal exploration license. This act
also allows the private sector to participate in geothermal exploration. By implementing this act, notonly public or state companies but also many private developers were given geothermal exploration
licenses by the Ministry of Energy. The PPA should reflect the project costs as the preconditions of ageothermal project varies depending on for example location and technology.
(b) Standardize PPA contract and tariff for geothermal power plantStandardization of PPA contract and determination of electricity tariff methodology for geothermal
power plant is necessary to give certainty and shorten long PPA negotiation process for private
developers and investors. Kenya, particularly the EPRA, has created standard PPA contract and tariff
for power plant. In terms of tariff, when FiT tariff policy still existed, tariff was determined based on
FiT tariff for geothermal power plants. In terms of contract, EPRA provides standard PPA contract forlarge-scale generators (more than 10 MW) and small-scale generators (lower than 10 MW). PPA
contract for geothermal power plant can include off-taker obligation to reduce foreign currency riskby paying electricity in US dollar, force majeure risk for IPP. In case of Olkaria III expansion project,
KPLC as off-taker undertook to pay capacity and energy payments in USD dollars, reducing foreign
currency risk for IPP (OrPower4). KPLC also has the obligation to make capacity payments to the IPP
in the event of both natural and political force majeure events regardless of the availability of theplant.
Challenge #2: Institutional framework and capacity for the implementation of laws and regulations
related to geothermal resource development, and the technical capacity of local workforce
Clear institutional framework and capacity of government organizations are crucial to the realization
the geothermal development project (e.g., human resource capacity to implement laws andregulations, and ability to negotiate and coordinate with numerous stakeholders including local
stakeholders and foreign institutions). There is a lack of skilled technical staffs at all stages ofgeothermal development for most of the targeted countries. Several projects in the region are stuckin the exploration stage. Stakeholders working in the region have also concerned about the capacity
and workforce of local technical staff, which could lead to project delays and higher costs. For the
stable continuity of the project, it is important not only to accumulate knowledge and experience
related to geothermal development within government agencies, but also to properly take over pastnegotiations with private sectors when there is a reorganization in the government. According to thestakeholder consultation, however, the local stakeholders point out that there are challenges in theseareas and they are barriers to project progress and entry into the geothermal development business.
While all of the targeted countries have enacted laws related to PPP, there are few realized examples
of PPP for geothermal power generation in the region. This suggests that there is a gap in the capacity
to sufficiently operationalize PPP units to manage and operate PPP projects especially for geothermal
power generation.
Recommendations:(a) Build continuous and sustained capacity building program
Continuous and sustained capacity building program is indispensable to address the issue of humanresource in geothermal development and to implement law or regulation related with geothermal.
Capacity building program is not only targeted for geothermal developers but also for government
officials such as ministries, regulators and PPP units. A sufficient number of skilled engineer or
4|Pagetechnical staff will accelerate the development of geothermal site in the targeted countries. Highcapability and knowledge of government officials on geothermal will enable the creation of investorfriendly framework, laws and regulations and their implementation and accelerate PPP geothermal
project. For example, Kenya has implemented continuous capacity building program for geothermal
development. Through international training program such as UNESCO-GRO, JICA and otherprogrammes. A study to evaluate skills gap in East Africa which was undertaken in 2015 revealed thatfor geothermal projects to be effectively developed and managed, more than 15,000 trained staff
would be required across the region. In this regard, the African Geothermal Centre of Excellence wasestablished under the auspices of African Union and physical structures to be established in Kenya.
The centre will admit students from all countries in Africa including the six targeted countries.
(b) Establish Clear Institutional Framework and Coordination
Establishing clear roles and responsibilities of the entities involved in geothermal development and
PPP project is key to effective delivery for government target on geothermal development. Sincemany stakeholders involved in geothermal project, inter-agency coordinator will play a major role tocoordinate among governmental agencies (including national park or wild-life agency) at all levels
related with geothermal project. Inter-agency coordinator also works closely with local communities,
local governments, industry and other public entities to ensure that a proposal by developers meetsthe requirements of all regulations. With clear institutional framework and the existence of interagency coordinator, the time for administrative process related with geothermal development can beshortened. Kenya has clear institutional framework of geothermal development and PPP project as
described earlier. For example, Kenya established the Geothermal Development Company (GDC). To
undertake upstream development of geothermal projects while KenGen concentrates on power plantdevelopment. Steam developed by GDC is then availed to either KenGen or IPPs for electricity
generation.
Challenge #3: Risks that are difficult for private developers to undertake and undeveloped
capabilities to coordinate the sharing of these risks between the public and private sectors.
There are risks that are difficult for private developers to undertake in implementing geothermal
development and power generation projects, such as exploration risk in initial stages of development(risk of not having sufficient resources or low steam productivity) and credit risk (risk of IPPs notreceiving payment from off-takers on time) in geothermal power generation. While it is important for
specialized government agencies to take on the initial stages of geothermal resource development aswell as for the public and private sectors to share the risk and cost associated with overall geothermal
resource development and power generation, the policy and institutional frameworks are not fully
capable or developed to make such arrangement in several countries
Recommendations:(a) Establish Government Scheme for Cost or Risk Sharing
Risk sharing between private and public sectors is a key for successful geothermal projects with PPP
scheme. For geothermal development, exploration risk is one of main barrier and drilling cost is oneof the main cost components. Particularly, at the initial stage of geothermal development with highcost and high risk, it is important to establish cost or risk-sharing scheme to attract participants fromthe private sectors. The cost or risk sharing scheme will decrease exploration risk and cost for private
developers, increasing the appetite of private developers to join geothermal exploration. Cost-sharing
scheme for private developers was implemented successfully in Japan as described earlier. Japanese
private developers benefitted immensely from a cost-sharing scheme that included a cost share of up
to 40% for exploration wells and 20% cost share on production and injection wells. In East Africa, the5|PageGeothermal Risk Mitigation Facility (GRMF) managed by the African Union Commission and financed
by KFW finances up to 80% of detailed surface exploration costs and 60% of exploratory and appraisal
drilling costs for up to four wells.
(b) Provide Government Guarantee combined with Guarantees from Banks/Insurers
Government guarantee can address concern of private investors about the capability andcreditworthiness of steam provider and off-takers which are mainly state-owned company.
Government guarantee can be combined with guarantee from banks or insurers to mitigate risks that
can’t be handled by private developers and investors, such as political risk and regulatory risk. The
Menengai Project in Kenya put in place a security package in the form of a partial risk guarantee (PRG)
from African Development Fund (ADF) combined with a support letter from government as describedin chapter 4. The PRG set up with AfDB support and backed by the government, covers non-payment
by the off-taker (KPLC), and non-delivery of steam by GDC. This approach successfully addressed theissues of creditworthiness of steam providers and off-takers. Private developer also can use either
Multilateral Investment Guarantee Agency (MIGA) of the World Bank Group which covers politicalrisk and termination risk or insurance from private sector such as Re Munich. MIGA’s political risk
insurance has been used in Tulu Moye Geothermal project in Ethiopia and provides an extra layer offinancial security to a government guarantee by the Government of Ethiopia, which supports theoriginal 25-year fixed price offtake agreement. On the other hand, Re Munich’s exploration risk
insurance has been provided for Akiira geothermal project in Kenya to cover the risk of insufficient
output due to exhausted geothermal resources.
Challenge 4: Lack of financial support for private developers
Geothermal development requires huge financial resources at each stage. In several targetedcountries, financial incentives such as tax exemptions are not clearly defined in the regulations. This
will be a barrier to the entry of private developers and the progress of the project. In addition to thetransparency of the process mentioned in Challenge 1, challenges exist in setting the purchase priceof generated electricity at a certain level (above the development cost) in order to increase theinvestment profitability and predictability of the project. Such a scheme is not secured by policy inseveral targeted countries and it may also become a barrier to the entry of private developers.
Recommendations:(a) Provide fiscal incentives for geothermal development
Financial incentives for geothermal projects (power generation and direct use) are necessary to
promote geothermal resource development. These incentives include attractive land use fees, tariff
exemptions on imports of materials and equipment, and other tax exemptions. These incentives will
benefit developers to reduce costs of geothermal exploration and improve profitability of project. In
addition, land rates should be removed during exploration stages which should be paid after
confirmation of a viable resource. For example, Kenya offers many fiscal incentives that include tax
and duty exemption for imported equipment, ten years tax holiday for geothermal plants of at least
50MW, exemption from stamp duty, the issuance of letter of support or government guarantee (forOlkaria project), etc. These fiscal incentives have benefited developers and improved profitability ofgeothermal projects in Kenya. Ethiopia also provides some fiscal incentives to private developers.
(b) Provide stable rate of return on geothermal investment for private sector
Stable rate of return on investment for the private sector is a key requirement for investor toparticipate in geothermal development. It will give certainty and make easy for investor to predict the
profitability and improve the bankability of geothermal projects. Stable rate of return can be in formof fixed tariff, bidding or auction tariff and actual levelized cost of generation plus a targeted return6|Pageset by the regulators or policymakers. In addition, access to low-cost finance (low interest rate andlong-term debt), such as climate funds and DFIs funds, is also important to further increase return on
investment for private developers. For example, Kenya had implemented Feed in Tariff (FiT) Policy for
geothermal power plant from 2010 to 2021 to provide stable rate of return for geothermal
development. FiT tariff for geothermal power plant with maximum capacity of 70 MW is US$
0.088/kWh for 20 years. After the implementation of FiT tariff, the installed geothermal power
capacity surged from 200 MW in 2012 to around 600 MW in 2017. Private developers also
participated in development of several sites in the country. Low-cost finance access also benefited
IPPs, particularly at Menengai project in Kenya. Menengai project reached an agreement to accessconcessional loan from climate finance through the Dedicated Private Sector Program of Clean
Technology Fund (CTF). CTF provided a concessional loan via AfDB for two IPPs.
Contributors:
Mr. Naoshige Kinoshita, Officer in Charge of Asia External Representation Office of African
Development Bank
Mr. Naoshige Kinoshita currently holds the position of Officer in Charge (OIC) at the Asia External
Representation Office of the African Development Bank (AfDB). He has been in this role since 2021
and brings with him over 25 years of professional experience in the private sector and MultilateralDevelopment Bank (MDB). Mr. Kinoshita specializes in the energy and infrastructure business in Africa.
Prior to his current position, Mr. Kinoshita served as the Chief Investment Officer at the Power, Energy,
Climate and Green Growth (PEVP) complex of the AfDB. During his tenure at the AfDB headquarters
since 2011, Mr. Kinoshita worked on private sector transactions. His responsibilities included
originating and closing debt financing for energy and infrastructure projects, as well as providing
equity investments in private equity funds. Additionally, Mr. Kinoshita represented the AfDB atadvisory boards in private equity funds such as ARM-Harith Infrastructure Investment Limited(ARMHIF), Climate Investor One Fund (CIO), and African Renewable Energy Fund (AREF). Notably, heplayed a crucial role in promoting Independent Power Producer (IPP) geothermal projects as a lender,
including the Menengai projects in Kenya and the Corbetti project in Ethiopia. Before joining the AfDB,
Mr. Kinoshita worked for a Japanese satellite company, where he held responsibilities for
implementing business strategy and managing mergers and acquisitions (M&A) and businessdevelopment in Asia. He also supported Enron's initial entry into the Japanese electricity market in
the early 2000s. In the 1990s, Mr. Kinoshita worked for ITOCHU Corporation, one of Japan's largest
trading firms. Mr. Kinoshita holds a Master of Business Administration (MBA) from the University ofCalifornia, Irvine, USA, and a Master of Science in Global Energy and Climate Policy from the School ofOriental and African Studies (SOAS), University of London, UK.
Dr. Peter A. Omenda, PhD
Dr. Peter Omenda is a geothermal project development expert of more than 30 years’ experience andwho has pioneered several geothermal exploration and development projects in Eastern Africa. Dr.
Omenda is currently a geothermal energy resources development consultant and researcher with
Scientific and Engineering Power Consultants Ltd based in Nairobi, Kenya; former Director of theInternational Geothermal Association (IGA), President of the African Geothermal Association andmember of the Geothermal Association of Kenya and Geological Society of Kenya. Dr. Omenda
previously worked with the Geothermal Development Company and the Kenya Electricity Generating
Company, PLC (KenGen) at senior management. He graduated with B.Sc. and M.Sc. degrees in geology
from the University of Nairobi, post graduate Diploma in Geothermal Energy Technology from
University of Auckland, New Zealand and PhD in Geological Sciences from University of Texas at El
Paso, USA. He also has a Master in Business Administration degree of Jomo Kenyatta University of
7|PageAgriculture and Technology, Kenya. He has published widely in international journals and presented
in many international workshops and conferences. Dr. Omenda has participated in geothermal
projects in many countries in eastern Africa. He has an excellent track record of accomplishments in
the geothermal industry with a special focus on energy policy, research, evaluation, planning andmanagement of geothermal projects from surface studies through drilling to power development
phases.
Mr. Jectone T. Achieng;
Mr. Jectone T. Achieng is currently employed as a Principal Investment Officer (Non-Sovereign
Operations) in the Power, Energy, Climate and Green Growth (PEVP) complex of the African
Development Bank. In this role, he is responsible for business origination, structuring, andnegotiations of project finance, corporate finance, and guarantee transactions until financial close.
Mr. Achieng's educational background includes a Master of Commerce (MCOM) in Development
Finance from the University of Cape Town, South Africa, as well as a Master of Business Administration(MBA) in Finance and a Bachelor of Commerce degree in Accounting from the University of Nairobi,
Kenya. He is also a Certified Public Accountant of Kenya (CPAK) and has undergone various trainings
in Project Management, Project Finance, Legal Documentation and Structuring, Financial Modelling,
Negotiation Skills, and other soft skills. With over 20 years of professional experience, Mr. Achieng
joined the African Development Bank in 2018. Prior to this, he gained valuable experience at the
Geothermal Development Company Limited, a government of Kenya Parastatal, where he held senior
management positions such as Projects Manager, focal point for International Development Partners
and Multilateral institutions, corporate strategist, and financial analyst. He also represented thecompany at the Public Private Partnership Node of the Government. Additionally, he has over fifteen
years of experience in Public Private Partnerships transactions, corporate finance, financial
management, strategy, and operations, having worked as a Transaction Manager at the Privatisation
Commission of Kenya and as a consultant with the Big Four Audit firms (Deloitte and KPMG Kenya).
Country reports can be accessed below:
Geothermal fact sheet for promoting PPP -Djibouti
Geothermal fact sheet for promoting PPP -Ethiopia
Geothermal fact sheet for promoting PPP -Kenya
Geothermal fact sheet for promoting PPP -Rwanda
Geothermal fact sheet for promoting PPP -Tanzania
Geothermal fact sheet for promoting PPP -Uganda
Geothermal fact sheet for promoting PPP -PPP models
Geothermal fact sheet for promoting PPP -Risks and mitigation measures

8|Page