A fund managed by BlackRock is acquiring a stake in a 310-megawatt wind farm in Kenya, the largest in the African continent.
The stake in Lake Turkana Wind Power Limited (LTWP), which owns and operates the wind farm, is held by the Finnish Fund for Industrial Cooperation (Finnfund). The fund, a development financier and impact investor, has been a shareholder in LTWP since construction of the wind farm began in 2014.
The shares will be acquired by Climate Finance Partnership (CFP), a public-private finance vehicle managed by BlackRock Alternatives. The deal is expected to close in the second quarter.
LTWP was the biggest equity investment made by Finnfund at the time of the commitment. It also was one of the biggest private investments in Kenya’s history. Together with the return paid by the company, the transaction will more than double the initial investment made by Finnfund.
Finnfund gets its funding from the State of Finland and the private capital markets, as well as retained earnings from its investments. All profits get recycled into new projects that drive sustainable development.
Renewable energy is one of Finnfund’s focus sectors. Recent investments include a geothermal power project in Nakuru County, Kenya.
“This is a natural next step for us,” says Finnfund associate director Helena Teppana. “We were there to share the initial risk of the construction phase and the start of operations. Today, it has been proved that the wind farm lives up to the expectations and generates revenue from providing Kenya with low-cost green power.”
The Lake Turkana wind farm, comprising 365 wind turbines, was connected to the national grid in 2018. Today it meets around 14% of Kenya’s electricity demand, reducing the country’s reliance on fuel imports.
As one of Africa’s fastest-growing economies, Kenya expects its total power demand to grow at the rate of almost 5% per annum amid increasing urbanization, rural electrification and rapid economic development.
“The project has exceeded our expectations in many ways,” says Teppana. “Despite its size and rural location, the project was built on time and on budget. During operation, we have seen the wind farm reach an exceptional annual average capacity factor of 60% plus. Some days for some hours, the wind farm has generated green power to the Kenyan grid at 100% of capacity. This is undeniably one of the best wind sites in the world.”
Focus on Africa
Climate Finance Partnership was conceived as a partnership between BlackRock and the governments of France (AfD), Germany (KFW), and Japan (JBIC), as well as leading US impact organizations.
The partnership secured US$673 million in commitments from a global consortium of investors including governments, philanthropies, and institutional investors in an oversubscribed final fundraise, exceeding the initial target of US$500 million. The fund plans to invest at least 25% of its assets under management in Africa.
Finnfund invests €200-250 million (US$214-268 million) in 20 to 30 companies in developing countries each year. It focuses on sectors such as renewable energy, sustainable forestry, sustainable agriculture, financial institutions, and digital infrastructure and solutions.
Today Finnfund’s investments, commitments, and investment decisions total about €1.12 billion, half of them in Africa. The company has 100 employees based in Helsinki and Nairobi.
LTWP is connected to the Kenyan national grid through a 438-kilometre associated transmission line constructed by the Government of Kenya through the Kenya Transmission Company. The project has a 20-year, fixed-price power purchase agreement with Kenya Power and Lighting Company.
The other five LTWP shareholders are Anergi Turkana Investments, KP&P Africa, Vestas Eastern Africa, the Danish Climate Fund through Investment Fund for Developing Countries (IFU), and Sandpiper Limited.