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Expediting Energy Supply in the Developing World

The critical energy needs of two areas of the developing world are on their way to being addressed thanks to coverage extended to investors by World Bank affiliate, the Multilateral Investment Guarantee Agency (MIGA).

Drought has wreaked havoc with the power supply in Kenya since 80 percent of the nation's energy supply  is dependent on hydroelectricity. The result is electricity  is only available three days a week in the capital Nairobi and 12 hours a day or less in other parts of the country. As a consequence, the chronic power shortages have  acted as a brake on social and economic development.

Kenya's power crisis looks set to be resolved by a  15-year investment guarantee issued by MIGA last summer that will allow a much-needed geothermal power plant project to go ahead. The guarantee will cover Ormat Holding Corporation's $40 million investment  in the Olkaria III Geothermal Power Complex against risks of currency transfer restrictions, expropriation, war and civil disturbance. The corporation is an investment arm of Ormat International, Inc. of Sparks, Nevada a company that specializes in ecologically based energy solutions. To be built in the Rift Valley, 50 kilometers northwest of Nairobi, the project will significantly  reduce Kenya's dependence on hydroelectricity and  provide a more reliable source of power. The Olkaria  III project is Kenya's first major private power project.  It is scheduled to generate 8 kilowatts but an appraisal of the geothermal potential of the area suggests output could be improved to furnish up to 10 percent of national power needs.

Half a world away in the adjoining Brazilian states of Rio de Janeiro and Espirito Santo, a natural gas processing plant will be upgraded and expanded to provide more clean energy, following investment insurance provided  by MIGA. Together with the Japanese Ministry of International Trade and Industry (MITI), the agency will extend US$13.7 million in coverage  to the Fuji Bank, Ltd., and US$1.3 million to Mitsui & Co.  Ltd. and Sumitomo Corporation, all of Japan to help bring the Cabiunas Gas Processing & Transportation Project to fruition. This marks the first project on which MIGA and MITI have cooperated. As in the case cited above, the coverage will protect the investors against loss incurred by currency transfer restrictions, expropriation, war and civil disturbance.

Owned by Cayman Cabiunas Investment Co. Ltd., the plant is being upgraded to capture, process and transport natural gas currently being burned on offshore platforms in the Campos Basin for use in power generation and as raw material for petrochemical products. The project involves the expansion of the plant's processing capacity by 70 percent plus the construction of two new pipelines to transport the new gas.

The improvements will allow Brazilian national oil company Petrobras (Petroleo Brasilerio S.A.), which will lease the facility to meet the country's growing energy needs with a more environmentally sound fuel.

In addition, as much as US$364 million will be saved in oil import substitution.

 Updated January  3rd 2001, By Charles Duerden ( cad@kotra.or.kr )