Kenya Tea Development Agency (KTDA) has partnered with energy firm GridX Duara Holdings for the provision of solar energy as the company turns its focus on green sources of power.
The agency has formed a joint venture, Chai Power Limited, with GridX for the installation of solar power plants in several of its factories. KTDA Power Company Limited, a subsidiary of the tea agency, owns a 51 percent stake in Chai Power.GridX owns the remaining 49 percent of the joint venture. Chai Power’s renewable energy projects will be operated by KTDA Power Company.
The solar plants will be developed and financed by GridX which has set aside $10 million (Sh1.2 billion) to fund the first 12 megawatts in 2023 and 2024, with further projects and funding planned for subsequent years.
KTDA chairman David Ichoho said Chai Power would play a management role under this venture to ensure that the plan is well executed and run within the set timelines.
“As a joint venture, Chai Power should spearhead solar uptake in the factories, especially those that do not have access to hydro,” said Mr Ichoho.
“KTDA has brought in GridX Duara as a minority shareholder to develop solar projects and provide asset financing to projects.”
The agency says the Chai Power’s projects will deliver low-cost renewable energy for the benefit of Kenya’s tea farmers while expanding the asset base of its power company and securing long-term stable cash flows for the subsidiary and KTDA holding at large.
Mr Ichoho said Chai Power will leverage KTPC’s expertise in managing complex energy assets, while creating a replicable structure that can rapidly deploy solar to KTDA factories and subsidiaries, without giving away ownership of the assets to a third-party independent power producer.
“Deploying projects in this manner will allow KTDA factories and subsidiaries to access lower-cost renewable energy without having to use capital that can be better spent on core business purposes,” he said.
KTDA factories use significant amounts of energy during tea processing, a large portion of which is in the form of electricity purchased from utility firm Kenya Power. According to the agency, at least 30 percent of the total cost of production emanates from electricity, which is the single most component of production cost that at the end of the day impacts farmers’ earnings.
KTDA runs several small hydro projects as a way of addressing high costs incurred in bills to Kenya Power. This is the latest investment in Kenya by GridX, which injected Shs770 million investment into Two Rivers Power Company in 2021.
Its other projects include Kinondo Flower Farm, Kitengela Hot Glass and Azura Retreats. More and large medium-sized firms are investing in their power generation to cut their reliance on Kenya Power.