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Kenya Coal Plant’s Power Could Cost 10 Times More Than Suggested, Group Says

Kenya Coal Plant’s Power Could Cost 10 Times More Than Suggested, Group Says

(Bloomberg) -- Electricity from a planned coal-fired plant in Lamu, Kenya might cost 10 times as much as its developers suggest, according to an energy group that wants the project canceled.

The plant, which will require an estimated $2 billion investment, is projected to be able to produce 1,050 megawatts of electricity. The project is 51% owned by Nairobi-based Centum Investment co., and is backed by General Electric Co.’s so-called Ultra-Supercritical Clean Coal Technology.

READ: GE Affiliates to Acquire Stake in Amu Power’s Kenya Coal Plant

Given the “realistic” costs of coal, electricity from the plant could sell for as much as U.S. cents 75 per kilowatt-hour on average, “more than 10 times what the plant’s proponents have claimed,” Cleveland-based Institute for Energy Economics and Financial Analysis said in a report. The coal plant could also slow the East African nation’s development of renewable energy resources, IEEFA, as the group is known, said. The plant is scheduled to start marketing the power in 2024.

The current pricing estimates are based on outdated costs of imported coal and “optimistic assumptions of how much electricity the plant will generate,” according to the report. The power purchasing agreement would require payment of at least $360 million in annual capacity charges even when the plant doesn’t produce any power. “There is ample justification to cancel the entire project,” it said.

Amu Power Co., the developer of the project, and Kenya’s energy ministry didn’t immediately respond to text-messages seeking comment.

To contact the reporter on this story: David Herbling in Nairobi at dherbling@bloomberg.net

To contact the editors responsible for this story: David Malingha at dmalingha@bloomberg.net, Hilton Shone

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