No part of this report may be circulated, quoted, or reproduced for distribution without prior written approval from KenGen. All the information contained herein was prepared for information only.

CONFIDENTIAL

Disclaimer:

Geothermal Resources Council (GRC) – Annual Meeting

1 October 2012, Reno, Nevada, USAEddy Njoroge, MD & CEO, KenGen

Geothermal Development in Kenya

1

Conclusion4

OUTLINE:

Kenya Medium-Term Geothermal Programme3

The Geothermal Journey in Kenya2

Preamble – Kenya’s Energy Sector1

2

HIGHLIGHTS ON AFRICA : ENERGY SECTOR…

Source: IEA, World Energy Outlook 2011 and AFREPEN Nairobi

Main Energy Sources

129 GW• Major 5 countries - Egypt, Tunisia, Algeria, Libya, Morocco

(population ~ 170 million)(electricity consumption per capita ~ 1,120kWh)

NorthAfrica Mainly Gas52 GW

SouthAfrica Mainly Coal44 GW

• South Africa only(population ~ 50 million)

(electricity consumption per capita ~ 5,350kWh)

1

Sub- SaharanAfrica

Mainly Hydro

33 GW• >50 countries including Islands

(population ~ 790 million)

(electricity consumption per capita ~ 140kWh)

Huge geothermal potential ~ 20GW

3

KEY HIGHLIGHTS: KENYA1

Key Facts

Source: http://en.wikipedia.org/wiki/List_of_African_countries_by_GDP_(PPP)_per_capita;

Kenya

• Size ~ 582,000 km²

• Electricity Access Rate- Urban ~ 56%- Rural ~ 12%

• Has ~ 40 million people.

• Electricity Consumption p.a ~ 7,000GWh• Consumption per capita ~ 170kWh/Yr

• Rich in Natural Resources (under exploration)- Geothermal ~ 10,000MW- Minerals (Gold, etc) ~ ?- Coal ~ ?- Oil & Gas ~ ?- Wind ~ ?

- Overall ~ 22%

4

PREAMBLE: KENYA’S ENERGY SECTOR…1

Ministry of Energy (MoE)(responsible for policy matters)

ELECTRICITY(single-buyer model)

Energy Regulatory Commission(ERC)(responsible for regulating the entire energy sector)

Source: KenGen;

KPC(Transport)

KPRL(Refinery)

NOCK (Marketer)

Private Marketers

PETROLEUM

KETRACO – Kenya Electricity Transmission Company LtdREA – Rural Electrification AuthoirityKPLC – Kenya Power & Lighting Company LtdGDC – Geothermal Development Company LtdIPPs – Independent Power ProducersKPC – Kenya Pipeline Company LtdKPRL – Kenya Petroleum Refinery LtdNOCK – National Oil Company of Kenya

GDC(Geo-

Resource Assess- ment)

IPPs(Power Gene- ration)

KenGen(Power Gene- ration)KE-

TRACO( New Trans-

mission)

REA (Rural Elec-

trification)

KPLC(Dis-

tribution & Existing Trans-

mission

GenerationTransmission & Distribution

KenGen have ~80% installed capacity market share

Nuclear Electricity Project (NEP)

5

INSTALLED CAPACITY AND DEMAND GROWTH: KENYA

Source: KenGen; Kenya Power

1

National Installed (1,708MW)

51%

Kenya

Thermal (542 MW)

Hydro (808MW)

Geothermal(207MW)Wind&Bagasse(31MW)

2012

51%

34%

13%2%

2012

1,050

828

200520042003 2011

1,221

1,150

0

1,100

1,250

900

1,000

1,200

850

20072006 2008 2009 2010

950

8-10%

Demand Growth (1,221MW)

6

Peak Demand (MW)

Source: Update of Kenya’s Least Cost Power Development Plan 2010-2030

Kenya has significant natural power potential in form of:

(i)Geothermal(~ 10,000MW);

(ii)Hydro (~1,500MW);

(iii) Wind (~4,400 MW); and

(iv) Potentially Coal,Oil and Gas.

Vision 2030 ~ 15,000MW

In 2018 Kenya must have at least 50% electricity penetration to reach the Vision 2030 target

Vision 2030 demand forecast of 8-10 %

PEAK DEMAND FORECAST TO MEET VISION 2030 ASPIRATIONS

2026/272018/19 2029/302023/242014/152009/10

1

7Source: Update of Kenya’s Least Cost Power Development Plan 2010-2030

PROJECTED CAPACITY EXPANSION MIX

4,812

1,600

4,200

17,754

4,679

Total Capacity

NuclearHydro

263

Geo- therm

al

WindImports (Hydro)

2,200

Thermal (Coal,

Gas & Oil)

National Capacity Expansion (17,764MW) - 2030

1

Kenya has signed the

first 400MW from Ethiopia

Geothermal to contribute ~

30% of power requirements

8

Conclusion4

OUTLINE:

Kenya Medium-Term Geothermal Programme3

The Geothermal Journey in Kenya2

Preamble – Kenya’s Energy Sector1

9Source: TMO; http://www.geothermal-energy.org/226,installed_generating_capacity.html

2 KENYA’S SPACE IN THE GEOTHERMAL WORLD

0.1%

Chi

na

0.2%

Por

tuga

l (Th

e A

zore

s)

0.3%

Gua

tem

ala

0.5%

Papu

a N

ew G

uine

a

Italy

New

Zea

land

Icel

and

5.3%

1.9%

5.8%

1.9%

7.8%

5.0%

0.5%0.8%

Cos

ta R

ica

Turk

ey

1.5% 0.8%

El S

alva

dor

Rus

sia

(Kam

chat

ka)

Ken

ya

0.8%

Japa

n

Nic

arag

ua

Ethi

opia

0.1%

Fran

ce (G

uade

loup

e)

Arge

ntin

a

0.0%

Ger

man

y

0.0%

Aus

tria

0.0%

Aus

tralia

0.0%

Thai

land

0.1%

Mex

ico

8.9%

Indo

nesi

a

11.1%

Philip

pine

s

17.7%

USA

28.8%

• World Geothermal Installed Capacity ~ 10,800MWe

Kenya is 9th with ~ 207 Mwe (1.92%)

10

1976-85 1986-98

• From 1992, no major works was undertaken until 1999

• 23 wells were drilled

• 45 MW (Olkaria I) commission ed between 1981-1985

• Most financing was from World Bank

• Drilling continued in Olkaria II Steam field ~ 30 wells drilled by 1992

• Concession given to Orpower 4 in Olkaria III field in 1998

Source: TMO; BDS Division

1956-59 1967-70 1971-76

• Two Exploratory wells drilled to a depth of ~950m

• GoK & UNDP entered into an undertake geothermal resource assessment

This decision was the turning point in Geothermal Development in Kenya …

• Six wells were drilled with positive results at Olkaria.

GEOTHERMAL: DEVELOPMENT IN KENYA TO-DATE2

11

• Olkaria II 3rd Unit 35MW commissioned

Current total Geothermal Capacity for

Kenya is ~207MW

Source: TMO; BDS Division

GEOTHERMAL: DEVELOPMENT IN KENYA TO-DATE (Cont.)2

1999-2006

• Discovery wells drilled in 1999 in Olkaria IV field

• Production drilling & commissioning Olkaria II 70MW in 2003

• Appraisal drilling started in 2006

2007 - date

• Production drilling started in Olkaria I&IV (~60wells drilled with over ~ 400MW capped)

• Olkaria I & IV 280MW planned for mid quarter of 2014

• Approximately ~US$420m committed by DFIs over the years for geothermal in Olkaria

• Currently DFIs have committed ~US$920m for Olkaria I & IV 280MW alone.

12Source: KenGen

2 KENYA’S GEOTHERMAL JOURNEY FROM 1956 to DATE

172162

144

128

114106103

1011009996949187

79

6759

504641

3631272421

15119743

1975

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1988

1990

2011

2012

1991

1992

1993

1994

1996

1997

1998

1999

2007

2008

2009

2010

1956

1973

1974

1978

Little activity for ~15yrs. No funding for geothermal.

Accele

rated

activ

ities

over

the la

st ~6

yrs

1 2 3

1

2

3

1981-85: Olkaria I – 45MW commissioned

2003: Olkaria II – 70MW commissioned

2010: Olkaria II 3rd Unit – 35MW commissioned

~ 170 wells drilled

13

OLKARIA I 45MW: COMMISSIONED BETWEEN 1981-1985

14

OLKARIA II 105MW: COMMISSIONED IN 2003 (70MW) AND EXTENDED IN 2010 (35MW)

15

GEOTHERMAL ALTERNATIVE USES: OSERIAN GREENHOUSES

16

GEOTHERMAL ALTERNATIVE USES: DIRECT USE – KenGen SPA

17

Conclusion4

OUTLINE:

Kenya Medium-Term Geothermal Programme3

The Geothermal Journey in Kenya2

Preamble – Kenya’s Energy Sector1

18

Reforming Institutional & Regulatory framework3

* - Local and Foreign financing to be usedSource: KenGen; TMO; BDS

Geothermal Development Company (GDC)*

Geothermal Prospects

BogoriaOlkaria Menenga i

Paka Silali

Geothermal Resource Exploration & Assessment

Government meeting upfront exploration and drilling investment

KENGEN & IPPs

Kenya Power (Off-Taker) Off-Taker 2 Off-Taker 3 ……

Power Purchase Agreement

19

Continuing to prove resource fields3

Source: KenGen; TMO; BDS

1. Olkaria Block (1,200MW)(Currently developing 280MW)

2. Menengai Block (1,600MW)

3. Bogoria-Silali Block(3,000MW)

> 14 sites

20

PROJECTED GEOTHERMAL PROGRAMME TO 2012-20303

* - Local and Foreign financing to be usedSource: KenGen; TMO; BDS

MW

No. of drilled Wells

Rigs–Own

Rigs - Hired

700

150

15

3

2,340

550

15

-

5,000

1400

15

-

Next 3 yrs 8 yrs 13 yrs 18 yrs

2015 2020 2025 2030

• KenGen has acquired 3 drilling rigs and hiring 5 more

• GDC has acquired 4 drilling rigs

21

Menengai Phase I 400MW: – 2nd Big Block after Olkaria3

Source: GDC; TMO

• Seven (7) wells successfully drilled – target 120 wells;• Five (5) wells successfully tested with ~ 27MWe;• Four (4) drilling rigs on site - two more under procurement;• 19 investors shortlisted for the first 400MW;• Financing ~ US$ 850 million ( including the six rigs) - AFDB, AFD, WB, EIB, GoK)

22

Menengai Phase II & Bogoria-Silali Phase I3

Source: GDC; TMO

• Preparations under way• Targets to drill 210 wells• Commissioning targeted for year 2021

MENENGAI PHASE II ~ 800MW:• Preparations under way• Targets to drill 210 wells• Commissioning targeted for year 2019

BOGORIA-SILALI PHASE I ~ 800MW:

23

Continuing to prove resource fields – private sector participation

3

Source: KenGen; TMO; BDS

Geothermal Private Power

Developers

Orpower 4 (48MW)1997

• Started with 13MW in 1998• Added 35MW in 2009• Adding another 50MW by 2013

24

Continuing to prove resource fields – private sector participation

3

Source: KenGen; TMO; BDS

Geothermal Private Power

Developers

Akira Site Concession

Suswa Site Concession2005

2007

• Not much has been achieved

• Not much has been achieved

Longonot Site Concession 2009 • Not much has

been achieved

25

Committing Resource Assessment Funds3

Source: TMO; F&C

Kenya Funding Approach– US$ million908

33

Total2012

380

2010

10

2008

160

2006

45

2005

80

2004 2011

200

New tranche for further drilling~ US$330m from GoK

~ US$380m from concessionary funding

26Source: KenGen;

OLKARIA IV – BIRDS-EYE VIEW3

27Source: KenGen;

Geothermal Steam Drilling – [GoK, KenGen] (June 2007- Aug 2012)

1

1Kenya (GoK)

~US$330m

Local Infrastru cture & resettle- ment of PAPs[Lot D – KenGen]

5

5Kenya (Local Companies)US$36m

Consul- tancy & Adminis-

tration [Lot Zero –

KfW, KenGen]

2

2New Zealand (SKM)

US$30m

Power Plant Cons-

truction[LotB1&B2 KfW, JICA, AfD, EIB KenGen]

6

6 S.Korea (Hyundai) & Japan (Toshiba/Toyota Tsusho)

US$382m

Sub- station & Trans- mission[Lot C -

EIB, KenGen]

4

4India (KEC )

US$ 27m

Steam Field

Develop- ment

[Lot A – IDA, KfW, KenGen]

3

3China (Sinopec)

US$ 138m

Olkaria I&IV 280MW Geothermal Project (June 2014)

Multi-financing (KenGen, GoK, EIB, AfD, KfW, JICA, IDA ~ US$ 1 billion)7

Tariff ~ 7 Uscts/kWh. One of the most competitive renewable project in Kenya

International Collaboration – Financing & Engineering3

28

Kenyan Case: Olkaria I&IV 280MW Geothermal Project3

Source: KenGen; TMO; BDS

US$ ‘million Financing Breakdown

ActivityOlkaria I

(140MW) Olkaria IV (140MW) Total GoK KenGen IDA JICA KFW EIB AFD

Total Funds

Drilling Costs 142 186 328 313 15 328

Steam Field 100 68 168 7 107 54 168

Power Plant 201 194 395 201 76 118 395 Substation & Transmission 22 13 35 3 32 35

Consultancy 16 14 30 30 30

Administration 20 21 41 29 12 41 Resettlement Action Plan - 10 10 10 10

Board of Consultants 1 1 1 1 1

IDC 24 33 57 57 57

Total 526 540 1,065 316 103 120 201 99 108 118 1,065

All commitments achieved and government guarantees

issued

29

Pioneering Portable Geothermal Wellhead Plants3

Video

30

Kenyan Case: 5MW Pilot Portable Geothermal Wellhead Plants

3

Wellhead

Control system and panels

4

Generator & Turbine2

Steam Separator1

Cooling towers3

31Source: KenGen;

Step 1: • Feasibility study for the next 560MW Olkaria geothermal project completed

Key Activities

Step 2: • Continue commissioning the Phase 1 (70MW) of Wellhead Generators

Step 3: • Commenced drilling 80 wells for the next 560MW geothermal project• 139 wells targeted• 560MW target commissioning by 2016

IMMEDIATE KEY STEP ON GEOTHERMAL DEVELOPMENT3

32

Special Purpose

Vehicle (SPV)

Fuel Supplier(KenGen)

FSA – Fuel (includes steam) Supply AgreementPPA – Power Purchase AgreementPRG – Partial Risk GuaranteeMIGA – Multilateral Investment Guarantee Agency GoK – Government of KenyaDFIs – Development Financial Institutions

Off-TakerLong-term PPA

Explicit Guarantee

GoK Comfort LetterWorld Bank - PRG

World Bank - MIGA

Lenders• DFIs• Commercial Banks

Debt

Investors• Local• Foreign

Equity (with KenGen portion)

Long

-term

FS

A

Explicit Guarantee

Operations & Maintenance

(O&M) ContractorO&M Contract

Engineer, Procure & Construct (EPC)

Contractor

EPC Contract

5 PLAN: PPP FRAMEWORK Option 1.

Source: KenGen; TMO

… for Geothermal plants…

EoI advertised

33

Conclusion4

OUTLINE:

Kenya Medium-Term Geothermal Programme3

The Geothermal Journey in Kenya2

Preamble – Kenya’s Energy Sector1

34

Conclusion5

The National Goal is to develop 5000MW of Geothermal by 2030

35

THANK YOU

36

DISCUSSION…