KENYA- Kenya Tea Development Agency (KTDA) has formed a joint venture, Chai Power Limited, with energy firm GridX Duara Holdings for the installation of solar power plants in several of its factories.
KTDA Power Company Limited (KTPC), a subsidiary of the tea agency, owns a 51 percent stake in Chai Power, according to records seen by the Business Daily. GridX owns the remaining 49 percent of the joint venture.
KTPC was established to run its hydropower plants to help reduce rising energy costs at its shareholding factories. KTDA runs several small hydro projects as a way of addressing high costs incurred in bills to Kenya Power.
Chai’s renewable power project will be developed and financed by GridX, which has allocated US$10 million for the first 12MW project in 2023 and 2024, with future projects and funding also promised. However, the project, once complete, will be operated by KTPC.
The agency said 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.
Electricity represents one of the largest cost-centers for each factory, increasing production costs and reducing the amount of cash available for farmers.
KTDA factories use significant amounts of energy during tea processing, a large portion of which is in the form of electricity purchased from the utility firm, Kenya Power and Lighting Company.
According to the agency, at least 30 percent of the total cost of production emanates from electricity, which is the single most important component of production cost that at the end of the day impacts farmers’ earnings.
Based on feasibility studies conducted on behalf of KTDA, the Standard media says deploying around 25 MW of solar across all 75 KTDA factories would create more than US$2.5 million (Sh310 million) in annual savings.
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.
He stated: “As a joint venture, Chai Power should spearhead solar uptake in the factories, especially those that do not have access to hydro. KTDA has brought in GridX Duara as a minority shareholder to develop solar projects and provide asset financing to projects.”
“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.”
Economic Survey 2022 shows there was a 61 percent growth in the power production capacity of small plants that have been set up by various organizations for their consumption.
Sasini Plc, also a big player in the Kenyan tea, and coffee sector, unveiled its plans to also install a solar energy plant in its 1,463 hectares of tea estates. The company is aiming at reducing its reliance on the country’s grid.
The company noted it will commission the 1.5 MW solar power generation station in its tea business this year in a move that will see it start relying on renewable sources of energy.
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