Dr. Silas M. SimiyuManaging Director & CEO

Geothermal Development Company Ltd

May 18, 2011

Development of Geothermal Resources in Kenya

Power Sector Overview

Ministry of Energy

Ministry of Energy

ERCERC

Energy Tribunal

Energy Tribunal

KenGenKenGen

ImportssImportss

IPPsIPPs

REAREA

GDC –steam resource development

GDC –steam resource development

KETRACO – Transmission /Wholesale Market operator

KETRACO – Transmission /Wholesale Market operator

KPLC – Distribution/Supply KPLC – Distribution/Supply

CustomersCustomers

The Geothermal Development CompanyThe Geothermal Development Company

• Incorporated in 2008 to accelerate development of geothermal resources in Kenya by reducing upfront risks to investors

Geothermal in Electricity Mix

4

Projected Electricity Demand

5

Least Cost Power Development Plan (LCPDP)Electricity demand of about 15,000 MW by 2030 is projected. At least 5,000 MW of electricity will come from geothermal

Mission & Vision

Resource prospectingDrilling (all stages)Field developmentReservoir and managementContracting for power plant development

Core Activities

Vision: To be a world leader in the development of geothermal resources

Mission: To develop 5,000 MW by 2030

Geothermal Power

Direct Use

Greenhouse HeatingHeating of greenhouses for cut roses ~160 hectaresExtraction of CO2 & H2S

Injection of CO2 to aid in photosynthesisFumigation of soils and sterilization of liquid recycled plant fertilizers using H2S

Water RecoveryPotable waterIrrigation

Industrial ApplicationsHeating and dryingIndustrial processes

Why Geothermal?

9

Abundant and indigenous

Suswa, Longonot, Olkaria, Eburru, Menengai, Arus-Bogoria, Lake Baringo, Korosi, Paka,

Lake Magadi, Badlands, Silali, Emuruangogolak, Namarunu Barrier Mwananyamala Homa Hills

Low Cost

*Based on construction time – additional time would be needed for feasibility and other pre-construction activities **6US cents/kwh based on importing hydro power from Ethiopia vs. 12 US cents/kwh based on remaining projects in Kenya, e.g. Mutonga***Lower than 10 cents/kwh, greater than 80% availability, less than 3 years, lower than 0.20 CO2 kg/kwh and known natural potentia

• Wind

• Coal

• MSD

• Nuclear

• Gas CNG

• Hydro**

• Gas Kerosene

• Solar

• Co-gene- ration

8.8

10.2

12.5

16.5

30-50

tbd

Assessment criteria

Generation Option

Low costUS$c/kwh Availability Fast delivery*

Environment friendly

Natural potential Comments

• Current GTs running at high loads, need more base load

• Coal potential in Kitui

• Significant potential, but dependent on weather

• Could pursue along side coal opportunity

• Dependent on weather with low average availability

• Min plant size of 500 MW required, politically sensitive

• Significant proven potential

• High exposure to hydrology risk (60% of installed capacity)

• Need to import, liquify for transport and re-gas

• Attractive intermediate capacity, but not large base load

• Geothermal

Location and transmission benefit

? ?

?

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11

Other advantages of Geothermal

• Green • Not affected by adverse weather• 95% Availability• Predictable cost of power over the plant

life• Technology already successful in Kenya• Modular incremental development

Development Strategies

14

Single GoK Entity Approach

1956-59 1967-70 1971-76 1976 - 85 1986-2003• Two

Exploratory wells drilled to a depth of ~950m

• GoK & UNDP entered into an agreement to extensively undertake geothermal resource assessment

• Drilling was accelerated and about 23 wells were drilled

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

• Wells never discharged and later abandoned

• Six wells were drilled with positive results.

• 45 MW (Olkaria I) commissioned between 1981-1985

• From 1992, financiers pulled out and no major works undertaken until 1999

• Most financing was from World Bank

• Olkaria II 70MW commissioned in 2003

• Decision was to concentrate geothermal development at Olkaria (80km2) after positive well results.

2003-2012

• Drilling ongoing

• Olkaria IV 140MW planned for 2012

Concessioning

1998

• Olkaria III concession for 100 MW

Jul 2000

• 8MW Com.

Dec2000

• 12 MW

Mar2002

• 13 MW

Sep2003

• 13.6 MW

2008

• 55 MW

2013

• 100 MW

Olkaria III

The first 13 MW developed from wells drilled by Government

Concessioning

• IPP license given in 2009• Targets to develop max

of 140 MW on a 700 MW Prospect

Observation• Under utilization of the

resource• Slow development pace

Longonot

Suswa

Observation• Growth relatively slow, expected development pace not realized

2007• Suswa (>600 MW)

concessioned to IPP

Surface Exploration

Exploration and Appraisal drilling

Feasibility Study

Production & Development of Steam Supply

Construction and Operation of Power Plant

GDC

GDC

GDC

GDC

Private Entity

Investment by Private entity/KenGen

Sale of Steam

Development Strategy

GDC Development Strategy

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CHALLENGES

CHALLENGE ISSUES SOLUTION

Financial Accelerated geothermal development entails large upfront financial input

GoK annual support of US$150 million GDC to generate internal revenue from steam sales to support the GoK budget Identify and consider alternative sources of financing

Social & Environmental

Land, local politics, competition for resources

Community engagement at all stages of developmentDemand for royalty payments?

Availability of drilling water

Land, local politics, competition for resources

Use boreholes as source of waterUse brine and recycle 100%

CHALLENGESCHALLENGE ISSUES SOLUTION

Inadequate infrastructure

Geothermal operations occur mainly in remote locations away from developed infrastructure

-GDC started operations in accessible areas and will need heavy infrastructural investment to open up other remote areas

-Incremental development and feed into distribution network

-Power evacuation from remote sites

Human Capacity Building

Geothermal industry requires specialized skills not readily available

On-the-Job training Short term Consultancy Services to bridge gap Geothermal Training Institute to train staff Partnerships with leading geothermal institutions

THANK YOU