The Multilateral Investment Guarantee Agency (MIGA), a World Bank group member, says it has provided political risk coverage for a power plant designed to alleviate power shortages in Kenya and offset greenhouse gas emission at the same time.

The guarantee valued at at least 5.7 billion shillings will support investments into a geothermal power plant with a combined capacity of 48 megawatts in the Olkaria geothermal fields in Rift Valley, 50 kilometres northwest of Nairobi.

Geothermal energy is a renewable energy source.

Power plants that use geothermal energy to generate electricity do not burn hydrocarbons as fuel, so their greenhouse gas emission levels are very low, or even non-existent.

"Geothermal power plants release about 1 to 3 per cent of the carbon dioxide emissions of a fossil fuel plant," said Christopher Ang, an Underwriter at MIGA.

"At 95 per cent capacity, the Olkaria III Geothermal Power Plant developed, owned and operated by OrPower 4, Inc., a subsidiary of Ormat Technologies, Inc. will produce more than 5.6 KWh of electricity.

"Compared to a diesel plant generating the same amount of energy, this would avoid several million tons of carbon dioxide emissions over the life of the project, " Ang added.

The base-load geothermal power plant, operating on a Build-Own-Operate basis, will address the power shortages in the country using one of the most advanced technologies available, 'the Ormat energy converter unit' to harness geothermal energy resources.

Electricity generated by the plant will be sold under a 20-year power purchase agreement with the national power transmission and distribution utility, Kenya Power and Lighting Company Limited.

According to MIGA, the project would not only reduce Kenya's exposure to fossil fuel price fluctuations, but also lower its dependence on imported thermal energy and help the country diversify from the use of hydropower for electricity generation.

MIGA's guarantees are protecting the investments of the foreign investor against the risks of transfer restriction, war and civil disturbance, expropriation, and breach of contract.

"MIGA is committed to helping investors and developing countries reduce the harmful practices associated with global warming by supporting investments in renewable energy, energy conservation and increased efficiency," said Yukiko Omura, Executive Vice President of MIGA.

"We are pleased our political risk insurance was able to facilitate the use of renewable energy sources in Kenya and reduce the adverse impacts of climate change."

MIGA was created in 1988 as a member of the World Bank Group, to promote foreign direct investment into emerging economies, to support economic growth, reduce poverty, and improve people's lives.