Basic Information

Name: Lamu Coal Power Plant
Chinese Name: 拉穆煤电站
Location: Kwasasi, Manda Bay, Hindi Division, Lamu County, Kenya. 
Type of Project: Energy (coal).
Project Developer: Amu Power Company Limited, a special-purpose joint venture between Gulf Energy Limited and Centum Investment Company Limited.
Main Contractors: Engineering, procurement, and construction contractor: Power Construction Corporation of China (PowerChina) and its subsidiary, Sichuan Electric Design and Consulting Company (SEDC); operation and maintenance contractor: CHD Power Plant Operation Company, a subsidiary of China Huadian Corporation.
Financier: Industrial and Commercial Bank of China (now withdrawn).
Cost: Figures vary between 1.947 billion USD and 2.504 billion USD.
Project Status: Suspended.

Project Outline

The Lamu Coal Power Station is a now-suspended 1,050 MW supercritical coal-fired power plant that was to be built on Manda Bay in Lamu, on the Kenyan coast, within the rich, biodiverse ecosystem of the Lamu Archipelago. The site is 20 kilometres from Lamu Old Town, a UNESCO World Heritage site recognised as the oldest and best-preserved Swahili settlement in East Africa. Diverse Indigenous communities span the archipelago, benefiting from its ecosystem services and practising a range of nature-based livelihoods. The 2-billion-USD coal power project (Kenya’s first) would have occupied a 350–395-hectare site and utilised three supercritical generating units, imported coal, a once-through cooling system (returned to below), two 420,000-tonne coal ash stockyards, a 810-hectare limestone mining concession 70 kilometres to the south in Witu, a dedicated port berth, and extensive new conveyer and road systems. The project was closely linked to the Lamu Port–South Sudan–Ethiopia Transport (LAPSSET) Corridor mega-infrastructure project.

According to the project’s environmental and social impact assessment (ESIA) from July 2016, the three supercritical coal-fired thermal generating units would have burned around 2.8 megatonnes (Mt) of coal a year, operating continuously for up to 25 years. Coal for the processing plant would have been imported from southern Africa through a planned berth at Lamu Port. The main plant would also have had a 210-metre smokestack releasing exhaust, as well as a coal-receiving system, coal handling equipment, conveyer systems, two coal stockyards for ash waste, and a permanent workers’ colony. The plant’s ‘once-through’ cooling system would have pulled in seawater from Manda Bay and released it back—9ºC warmer, desalinated, and chlorinated. The electricity produced would have been distributed via a 400 kV power substation and a new 520-kilometre transmission line, at an additional cost of 270 million USD, funded separately and developed by the government-owned Kenya Electricity Transmission Company Limited (Ketraco). The plant would have been adjacent to a number of planned LAPSSET Corridor project components, including a 32-berth deep-sea port, the terminus of a cross-country oil pipeline, an oil refinery, and various heavy industries.

Lamu Power Station would have been Kenya’s first entry into the coal industry. Since 2000, the Ministry of Energy has conducted coal prospecting efforts in different parts of the country. From 2010 to 2014, the national government proposed two other coal plant projects, in Mombasa and Kilifi, but they failed to gain traction and public support. As an alternative, in 2013, the Kenyan authorities proposed the coal plant in Lamu, interlinked with the LAPSSET Corridor mega-infrastructure project, importing coal through Lamu Port, and processing it at the plant. The government is also pushing to develop a domestic coal-mining industry in Kitui County.

Within the Kenyan Government, prominent proponents of the project included Deputy President William Ruto, Cabinet Secretary Charles Keter, and Energy Regulatory Commission (ERC) Director Pavel Oimeke. Within a three-month period in early 2017, Oimeke stepped into the directorship of ERC, dismissed the preliminary objection filed by community groups against the issuance of an energy generation licence, and approved (but did not gazette) the licence, as detailed below. President Uhuru Kenyatta (in office since 2013) has not spoken directly about coal, but in 2018, he announced a goal for the country to achieve a transition to 100% renewable energy by 2020. In November 2021, at the COP26 UN Climate Change Conference, Kenyatta revised this goal to 2030. The late Chris Kirubi, until recently the CEO of Centum, one of the joint-venture partners behind the Lamu project developer Amu Power, was widely regarded as being close to the Kenyatta administration.

Amu Power is a joint-venture company between Kenyan Gulf Energy Limited and Centum Investment Company Limited. The project was envisaged as a public–private partnership on a build–own–operate (BOO) basis, with Amu Power in charge of designing, financing, constructing, commissioning, testing, owning, maintaining, and operating the plant for the agreed term.

The Power Construction Corporation of China (PowerChina) and its subsidiary, Sichuan Electric Design and Consulting Company Limited (SEDC), signed an engineering, procurement, and construction (EPC) contract  for the project. CHD Power Plant Operation Company, a subsidiary of China Huadian Group, was contracted for operation and maintenance (O&M). PowerChina expected the EPC cost to be between 1 and 1.2 billion USD. China’s state insurance provider, China Export & Credit Insurance Corporation (Sinosure), committed to provide insurance. Kenya Power and Lighting Company (KPLC) signed the project’s Power Purchase Agreement (PPA) with Amu Power.

While the original project cost set out in the licence application was 1.947 billion USD, a more recent estimate, in Kenya’s 2020–2040 Least Cost Power Development Plan, was 2.504 billion USD. The Industrial and Commercial Bank of China (ICBC) was originally set to provide a loan of 1.24 billion USD  covering 75% of the debt financing: up to 85% of the EPC contract price and 85% of the Sinosure premium. The status of the remaining debt and equity financing could not be confirmed, although early in the project planning Amu Power sought financing from several other sources, including the African Development Bank (AfDB), Standard Chartered Bank, and Standard Bank. As of late June 2019, according to PowerChina, ‘the Project was in suspension while Amu was working on equity fundraising’.

Standard Bank of South Africa served as financial arranger for the project and in 2015 drafted a term sheet to provide a 250-million-USD loan. In September 2017, a representative said the bank had reviewed the opportunity to finance the project but, ‘for various reasons’, decided against it. Stanbic Bank, a Standard Bank subsidiary, continued to provide overdraft and revolving credit facilities to Centum Investment. ICBC is the largest shareholder in Standard Bank, with a 20% stake.

The World Bank and its private-sector arm, the International Finance Corporation (IFC), also have indirect ties to the project. The World Bank supported the achievement of several early milestones in the Lamu plant’s development, including the negotiation of its PPA. The IFC also funded commercial banks that subsequently supported Amu Power and Centum Investment and therefore, indirectly, the Lamu Power Station. However, a complaint to the IFC’s accountability mechanisms was deemed ineligible in 2019 as the mechanism determined that the financial links to the IFC did not create active, ‘material exposure’ to the Lamu plant.

In 2018, General Electric (GE) signed an agreement to join the project, with considerable media attention given to its provision of ultra-supercritical ‘clean’ coal technology. However, in September 2020, GE announced it would exit the ‘new build’ coal market while honouring existing commitments. GE did not specify which existing projects it would follow through on, but Business Daily concluded it was abandoning the Lamu project. Before this, and despite the controversy around the project, in 2019, the US Ambassador to Kenya publicly expressed support for the project, stating: ‘Kenya needs a larger, less costly base load of power first. Coal is the cleanest [and] least costly option.’

The AfDB was listed extensively on project documents as providing a partial risk guarantee, and in early media reports it was cited as an investor. Notably, the bank’s then president Donald Kaberuka left the AfDB in 2015 and became the chair of the board of Centum in 2016. The AfDB board delayed its vote on the project for several years and ultimately chose not to provide a partial risk guarantee to the project; it then exited from coal entirely.

Contracting for the Lamu coal plant occurred largely between 2013 and 2015. Financial services agreements were signed in 2015, and the PPA was signed in 2017. Environmental impact studies and discussions proceeded quickly from 2015 to 2016. In September 2016, the National Environment Management Authority (NEMA) approved the project’s ESIA, and the Energy Regulatory Commission quietly approved the energy generation licence in early 2017.

In response, community advocates Save Lamu and Natural Justice filed litigation appealing the issuance of the environmental licence. The case ran for two years. From 2015 to 2019, Save Lamu and partners built an active anti-coal campaign, with measures including local community engagement, extensive financial stakeholder advocacy, public demonstrations, and fostering of media and public attention.

In June 2019, the National Environment Tribunal issued a judgement revoking the project’s environmental licence. Although Amu Power filed an appeal, there has been no progression on the case (or the project) since.

In November 2020, ICBC, the main financier, informed local civil society groups that it had withdrawn from financing the project. The bank repeated this to the Go Clean ICBC civil society coalition in 2021. A presidential task force report reviewing PPAs dated 29 September 2021 listed the Lamu coal plant PPA as ‘lapsed’ and recommended PPAs be ‘terminate[d] if the capacity is not required’.

As of January 2022, the project thus remains in the planning stages, suspended after the revocation of its environmental licence, and left in financial limbo by the withdrawal of its main investor.

Project Impacts

• Employment: Project proponents claimed the plant would have generated local employment, but assessments showed the jobs created would have largely been low-skilled, dropping from around 1,200 during construction to 250 during operation. Most locals were unlikely to qualify for these operating positions.

• Environment: A technical report by Greenpeace found the project would have resulted in extremely high emissions of air pollutants—likely to cause severe health impacts for local people. Dredging and wastewater disposal would have harmed marine life, including mangroves, seagrasses, and coral reefs, as well as the animals that depend on them. Fly ash, acid deposition, and acid rain could have reduced farmers’ yields and introduced toxic metals into food and water supplies.
  
• Climate Change: The plant would have become Kenya’s single largest emitter of greenhouse gases, potentially releasing 8.8 million tonnes of carbon dioxide into the atmosphere each year—single-handedly doubling current greenhouse gas emissions from the energy sector.
  
• Biodiversity: Lamu is a biodiversity hotspot, containing extensive systems of dense terrestrial forest, mangrove, and baobab forest, marshlands, grasslands, savannahs, sand dunes, beaches, and networks of creeks and water channels, which provide vital habitat and nurseries for many marine species. Numerous recognised biodiversity areas near the proposed project area would have been threatened by the power station and associated activities.

• Land Acquisition and Compensation: Even though the plant has not moved forward, there have been escalating disputes over displacement and compensation for loss of land and natural resources due to the project. More than 100 farmers were displaced by road construction without compensation. Local farmers have struggled due to a lack of information and consultation and faced irregularities in compensation schemes that excluded many and created uncertainty for those not yet displaced.

• Indigenous Peoples and Cultural Heritage: Most of Lamu’s population are Indigenous and have historical ties to the land and resources, which they manage and utilise according to tradition. The damage the project would have caused to the local environment and the cultural and architectural integrity of Lamu Old Town and other archaeological sites across the area threatened Lamu residents’ lives, livelihoods, and culture.
  
• Armed Conflicts: Lamu borders Somalia and faces a complex security situation. Travel in some areas is dangerous, with kidnappings, killings, and attacks in recent years. This insecurity has constrained local campaigners’ operations and has been used as justification by police and other officials to investigate, intimidate, or curtail the activities of community and civil society activists.
  
• Debt Sustainability: Although there are questions about the economic viability of the project, the Kenyan electricity utility would have been contractually obliged to pay 362 million USD in minimum capacity charges annually for 25 years. Project documents show the Kenyan state would have been liable for almost all project risks, which taxpayers would ultimately cover. The project would also have added to Kenya’s external public debt, about 20% of which in 2020 was owed to Chinese banks.
  
• Governance: The project and its developer, Amu Power, have enjoyed support from several high-level government officials, sweeping government-backed risk guarantees, favourable interest rates, fee waivers and exemptions, fast-tracking of regulatory approvals, and nominal oversight. Meanwhile, local communities have struggled to obtain pertinent information about the project.

Proponents cited Lamu Power Station as a flagship project that would have contributed to widely promoted national plans to foster industrialisation and spur economic development, and painted the development as a transformative project that would bring jobs and enable industrial growth—an initiative designed for the benefit of the community, county, and country. Sceptics and critics were accused of being anti-development.

The main arguments for the Lamu Power Station were that it would provide ‘extremely flexible and cheap’ baseload power, lower the cost of electricity, help to diversify energy sources and create a ‘healthy energy mix’, avoid the unreliability and inflexibility of renewable energy, and catalyse industrialisation. For example, Amu Power, NEMA, and the project’s ESIA claimed that solar and wind energy could not be stored or used as baseload energy and that relying on any more than 10% from these sources in the energy mix would lead to instability in the grid.

However, justification for the Lamu project was based on inflated figures for energy demand growth of up to 15%, although real growth was about 6% per annum throughout the 2010s, even before the Covid-19 disruptions. These inflated figures were cited initially in the Kenyan Government’s 2011 and 2013 Least Cost Power Development Plans (LCPDPs), which introduced coal energy into the country’s proposed energy mix. The 2017–2037 LCPDP assessed that Lamu Power Station would cause a substantial supply surplus (under a likely medium-growth scenario) and lead to electricity price increases; the report was subsequently removed from the Energy Regulatory Commission (ERC) website.

Project developers and pro-coal government officials made general promises of employment, business opportunities, and unspecified indirect economic benefits, while assuring the public that the power station would cause no negative environmental or health impacts. However, as local civil society group Save Lamu and its partners have long argued, if built, the power station would have profoundly altered Lamu’s fragile and largely pristine ecosystem and the community intertwined with it, with severe costs and nominal prospective benefits, which would have been quickly outweighed by the negative impacts.

Employment

Employment generation was a common benefit cited by project developers, and the need for employment was widely used to counter public concerns and criticism. However, public claims and project documents were vague and grossly overstated these benefits when compared with the detailed information in the project’s ESIA.

According to Amu Power: ‘The plant as well as related industries will be a massive employer, bringing to Lamu high-quality, well-paying jobs, that will further create more indirect employment.’ Gulf Energy CEO Suleiman Shabbal stated that ‘there is no greater pollution than having millions of our youth remaining jobless and having their ambitions crushed through loss of hope’. Similarly, Centum Director Chris Kirubi declared: ‘We cannot hold back development. We have lots of young people graduating and they don’t have jobs … Our young people need jobs. Without jobs they are lured easily to drugs, crime and even extremist groups.’

However, at most, according to the ESIA, the power station would have created 1,226 temporary and low-wage ‘semi-skilled and unskilled positions (such as kitchen staff, security guards and cleaners)’ for Kenyans during construction and 250 workers during operations, who would have been sourced locally only ‘if the skills base exists’. An unskilled job in Kenya can garner a wage of 40–60 USD per month.

Also, according to the summary Resettlement Action Plan (RAP), the traditional users of the project site’s land, the Aweer, ‘will lose their source of livelihood since they will not be able to access the area’, but they would have been considered for unskilled jobs at the power station, which civil society groups noted was ‘a wholly inadequate response for traditional communities who are facing a range of threats to their cultural heritage’. Similarly, most of Lamu’s residents, with their extensive experience with traditional nature-based livelihoods, would likely not qualify for power station jobs, nor would such jobs be appropriate or provide a living wage.

Overall, the meagre prospective job benefits would have been vastly offset by job losses due to displacement, environmental harm, and resulting loss of productivity for hundreds of farmers, thousands of fisherfolk, pastoralists, hunters, gatherers, beekeepers, tourism operators, and other locals whose lives and livelihoods depend on Lamu’s natural resources.

Environment

Project proponents argued variously that Lamu power station would have caused no harm, acceptable levels of harm, or even have beneficial environmental impacts, moving people from biomass to electricity and thus reducing deforestation; and, through desalination, eliminate water scarcity in Lamu. The power station’s developers and high-level government officials claimed the project would have had no toxic emissions, no health impacts, and acceptable pollution levels—akin to a dose of medicine.

However, the plant would likely have proven disastrous for Lamu’s ecosystem and local communities. A technical report by Greenpeace found that, despite promises of using clean coal, the Lamu Power Station as designed would have emitted five to 10 times the level of major air pollutants emitted by new coal-fired power plants in China or the European Union today, including sulphur dioxide (SO₂), nitrous oxide (NOx), coarse particulate matter (PM10), fine particulate matter (PM2.5), and mercury. Greenpeace’s air-quality modelling study further calculated (conservatively) that the power station would have caused 1,600 premature deaths, lower birth weights, and corresponding health impacts, with air pollution extending across neighbouring counties.

The dredging of marine areas to build the plant was projected to cause significant damage to neighbouring mangroves, seagrasses, and coral reefs, according to the project’s own ESIA. Once operational, Lamu Power Station’s once-through cooling system would have released desalinated, chlorinated water 9ºC above normal temperatures into Manda Bay, causing potentially catastrophic effects: altering the temperature and salinity of the water, trapping and killing marine life in the filtration system, and damaging locally abundant mangroves, corals, and seagrasses, which serve as vital carbon sinks. Coal processing and the remaining waste would have introduced toxins into the air, water, and soil—across bioreserves, an extensive coral reef and seagrass area, and protected forests. Fly ash, acid deposition, and acid rain could have reduced farmers’ yields and introduced toxic metals into food and water supplies. Coal ash, a waste product that was to be stored locally, could have affected marine and human health directly or by contaminating fish for consumption, or by leeching into and contaminating the already-scarce drinking water supply.

The plant would have become Kenya’s single largest emitter of greenhouse gases, potentially releasing 8.8 million tonnes of carbon dioxide into the atmosphere each year—single-handedly doubling current greenhouse gas emissions from the country’s energy sector. On its own, Lamu Power Station would have brought Kenya to the limit of its emissions commitment  under the Paris Agreement. However, the ESIA’s climate risk assessment examined only the risks that climate change posed to the project.

The project also needs to be considered in context. The adjacent and related LAPSSET Corridor development will include large components in Lamu, yet the cumulative impacts of the projects have not been considered. (For more information on other LAPSSET Corridor projects, see People’s Map profiles on Lamu Port, forthcoming).

The ESIA’s omissions, weaknesses, and lack of resolution of these issues—combined with years of statements from project developers and pro-coal government officials that the power station would have few or no negative impacts—suggest there is little imperative to protect or mitigate harms to Lamu’s ecosystem or its communities. This is particularly troubling because Lamu is a biodiversity hotspot, containing extensive systems of dense terrestrial forest, mangrove, and baobab forest, marshlands, grasslands, savannahs, sand dunes, beaches, and networks of creeks and water channels that provide vital habitat and nurseries for many marine species. Lamu is home to 70% of Kenya’s mangroves, covering an area of around 345 square kilometres, which offer protection against erosion and flooding and serve as breeding grounds for various fish, and which cover the shoreline around the power station site and future coal-shipping route.

Recognised biodiversity areas near the proposed power station include the Kiunga Marine and Dodori Forest reserves, designated as UNESCO Biosphere Reserves; the Boni-Lungi Forest Ecosystem, which is part of the internationally recognised Coastal Forests of Eastern Africa Biodiversity Hotspot; and Witu Forest Reserve. The marine ecosystem, mangroves, and terrestrial forests adjacent to the power station are critical habitat for many vulnerable, threatened, endangered, and critically endangered species—including those endemic to Lamu, and at least two species endemic to the Boni-Lungi Forest Ecosystem (the rare hirola) and Witu Forest (Euphorbia tanaensis). The Lamu project also planned to mine limestone on 810 hectares area next to Witu Forest, which contains at least nine threatened and endangered species of flora and fauna.

Land Acquisition and Compensation

There have been escalating disputes over displacement and compensation for loss of land and natural resources due to the Lamu Power Station and the LAPSSET Corridor more broadly. Initial land allocations and road construction displaced hundreds of Lamu residents and caused a range of problems, including lack of information and consultation, irregularities in compensation schemes, and changing numbers of recipients (due to multiple claims and obscure verification processes). This excluded many farmers who experienced years of displacement without compensation, as well as creating uncertainty for those not yet displaced.

In 2020, as it became apparent that the coal plant project was not moving forward, Kwasasi area farmers largely abandoned hope of compensation and instead demanded their land be returned to them. Key concerns regarding land and resettlement include:

• Compulsory acquisition: The power station project site covers 350–395 hectares and was to be compulsorily acquired (without consent) from local farmers and leased from land within the delineated LAPSSET Corridor zone. Despite the expected displacement of hundreds of people, project proponents have not released a full RAP as required, though community advocates found a summary RAP published on the AfDB’s website, according to which 675 people would have been affected if the project went ahead. It estimated that 124 fisherfolk ‘operating within and around the project area’ would have been affected, even though the plant would have been on Manda Bay, which is the main fishing route for Lamu’s 6,000 fisherfolk. According to the RAP summary, the 124 fishers would have been compensated for one year of losses and provided with unspecified modern fishing gear and boats with which to fish offshore.
  
• Delayed compensation and irregularities: Kenya’s National Land Commission (NLC) is responsible for land acquisition, including resettlement arrangements and compensation, and the leasing of land to Amu Power. In 2015, the NLC attempted to allocate and retitle public land for the power station even before the project had its licences. In 2016, at least 675 farmer-landowners gave up access to their land on the Lamu project site, expecting to receive 800,000 KES (around 8,000 USD at the time) per acre, as listed in a NLC report, but at the time of writing in January 2022, they have not received compensation. In 2017, NLC Chairman Muhammad Swazuri was investigated for ‘propagating land injustices’ in the compulsory acquisition and compensation process associated with infrastructure developments in Lamu.
  
• Rejection of offer of alternative land: In 2018, the LAPSSET Corridor Development Authority ‘advise[d] the NLC to apply the Land to Land Compensation approach as a sustainable method of compensation’. Farmers who preferred monetary compensation and a right to choose protested loudly. Media reported local county leaders had ‘threatened to sabotage the Sh200 billion coal-fired power plant if the government will insist on land instead of monetary compensation for those displaced by the project’. The county speaker said the switch from offering cash to land was ‘sinister’ and possibly a con: ‘We support our farmers. They want to be compensated in cash and so be it. We will not accept the suggestion to have land to land compensation.’
  
• Road construction and displacement: When development of power station access roads began in 2017, at least 109 farmers working their traditional lands in Kwasasi were directly displaced by road construction, without consultation or compensation. Farmers’ cropland was destroyed, causing losses in income and food security, and increasing the insecurity of tenure among a broader group of local farmers who were not sure whose land would be flattened next. The farmers filed complaint letters and formal requests for information to relevant government agencies. The Kwasasi Mvunjeni Farmers Self-Help Group joined Save Lamu in the complaint to IFC’s grievance mechanism (as discussed above).
  
• Indigenous land issues: Lamu’s Indigenous communities, who have traditionally shared and maintained their natural resources, have for generations experienced political marginalisation and land injustices. Particularly in the 1970s, politically motivated settlement schemes distributed land and, later, title deeds to new settler communities, while the Indigenous populations remained land-insecure. Thus, the power station’s compulsory acquisition processes compensating landowners may be a double injustice for Lamu’s Indigenous residents whose land tenure largely remains informal and vulnerable. In addition, these large-scale infrastructure projects allowed opportunistic occupation and purchases of land to capitalise on the project and potential compensation by people well placed to exploit the situation.

Impacts on Indigenous Peoples and Cultural Heritage

Most of Lamu’s population is Indigenous, including the majority of those in the vicinity of the power station. These diverse groups include the Bajun, Swahili, Sanye, Aweer (more commonly known as the Boni), and Orma, as well as the Giriama, Mijikenda, and Kore Maasai, among others. The Lamu community has a history dating back more than 1,000 years, throughout which time they have traversed and communally used the land and marine resources and practised a range of traditional livelihoods.

In addition to human health and livelihood impacts, water, air, and soil pollution from the Lamu coal plant, as well as population increase and urban sprawl, would have likely damaged the cultural and architectural integrity of Lamu Old Town and other important archaeological sites across the area. Ships carrying imported coal for the plant would have passed between islands with archaeological sites of great historical significance, such as the Takwa ruins and Manda Town on Manda Island, and Siyu Fort and Shanga on Pate Island.

The UNESCO World Heritage Committee and its advisory bodies recommended the Kenyan Government not proceed with the power station. Inscribed in 2001, Lamu Old Town was recognised as a World Heritage Site for its unique local architecture and wealth of historical attributes. Swahili communities have continuously inhabited Lamu Old Town for more than 700 years. The cultural integrity of the town is dependent on the region’s rich biodiversity and the broader surrounding community of diverse Indigenous groups; the ecosystem is critical to and intertwined with Lamu residents’ lives, livelihoods, and culture.

Armed Conflicts

Lamu, which borders Somalia, has been experiencing heightened, complex insecurity and threats of violence for decades, although there is no direct ongoing armed conflict. Travelling across the sparsely populated county can be dangerous and sometimes deadly. The Aweer (Boni) people have been displaced from their traditional forests due to government directives, as Kenyan security forces launched Operation Linda Boni against terrorist group Al-Shabab. Insecurity and violence have limited the efforts of local civil society groups, and have been exploited by police and other officials to investigate, intimidate, or curtail activists campaigning against the project.

Debt Sustainability

There are compelling indications the Lamu Power Station project was not economically viable, would not have been profitable, and was likely to create an oversupply of power. Regardless of production, the majority state-owned KPLC would have been contractually obliged to continue paying 362 million USD in minimum capacity charges annually for 25 years. Kenya’s foray into the coal industry could have resulted in an idle plant, lasting harms, and stranded assets.

While the 1.2-billion-USD loan from ICBC was to be extended to Amu Power, Kenyan taxpayers would have guaranteed almost all risk in the project—responsible even for acts of God and political events, including adverse government action or inaction, or public unrest, according to the sweeping terms of the project’s PPA and the Letter of Support from the Treasury. Outside these agreements, Kenyan taxpayers would also have covered the costs of the power station’s required ancillary components, such as transmission lines (270 million USD) and potential railway extension (more than 2 billion USD).

There have been efforts to resolve the many expensive and inflexible PPAs for energy projects in the country. Kenya’s Cabinet Secretary for Energy and Petroleum, Charles Keter, set up PPA task forces to recommend a way forward. Kenya faced an external public debt equivalent to 35.6% of gross domestic product at the end of 2020, with Chinese lending accounting for around 20% of its external debt stock.

The government’s 2017–2037 Least Cost Power Development Plan predicted an expensive energy surplus from the Lamu Power Station and recommended long delays in developing the project, as noted above. The LCPDP predicted that large-scale power projects, particularly the Lamu plant, would ‘be grossly underutilized’ and ‘aggravate the projected supply–demand imbalance’. The plan further recommended the government renegotiate the PPAs for large power plants, including for Lamu, ‘to introduce operation[al] flexibility, reduce reserve requirements and optimize energy costs’. The most recent (April 2021) LCPDP emphasised: ‘It is noteworthy that the optimized scenario does not accommodate the proposed Amu coal [plant].’

Overall, Kenya does not face a crisis in electricity generation, nor a lack of good options for future generation. More than 90% of Kenya’s electricity generation is from renewable energy sources, and supply has mirrored demand. The country is richly endowed with potential renewable energy sources—most substantially, geothermal—and already hosts Africa’s largest wind power plant. Efforts to increase electrification are well under way, both by extending the grid and through prioritisation of fast, decentralised, and affordable infrastructure, rather than mega-projects such as the Lamu Power Station. Investing in reducing inefficiencies and losses in transmission and distribution alone could lead to recovery of about 20% of electricity already being produced, and reduce the need for further indebtedness from large-scale fossil fuel projects such as Lamu.

Governance

The Lamu project and its developer, Amu Power, enjoyed general support from several high-level government officials, sweeping government-backed risk guarantees, favourable interest rates, fee waivers and exemptions, fast-tracking of regulatory approvals, and nominal oversight.

Meanwhile, the Lamu community and wider Kenyan public struggled to obtain pertinent information about the project. Civil society groups contend that proponents obscured project details in publicly available information, minimised the number of community meetings and made them difficult to access, made false and misleading statements regarding project details, and made project documents difficult to find and access.

From the available information, several factors raised concerns among local communities and civil society groups. First, the project’s proponents failed to articulate adequate justification for pursuing the Lamu Power Station. Second, the ESIA failed to meet basic standards, as affirmed by the National Environment Tribunal, and minimal effort went into adhering to proper procedures and regulatory requirements. Lamu community groups filed formal requests for information that were largely ignored or simply acknowledged as received with no action taken. Third, regulatory process approvals moved quickly—in some cases, more quickly than allowed by law. Community groups were therefore left to monitor developments after the fact, file complaints, or litigate to seek remedy or rectification.

While government officials generally say that favourable terms are needed to incentivise such projects, the favourable terms provided to the Lamu Power Station developers are substantial. Kenya’s Treasury issued a Pre-Export Verification of Conformity waiver for equipment, materials, and vehicles for the plant’s construction and the LAPSSET Corridor project, as well as value-added tax and construction levy exemptions  for many of the Lamu project’s components.

Perhaps most damning, Kenyan taxpayers would have assumed a dangerously high level of risk through the terms of the PPA and Letter of Support. Any development that adversely affected any party or contractor could have counted as a ‘political event’ and triggered compensation. As noted above, the community surrounding the Lamu project remains in a constant state of insecurity with occasional political violence and incursions from militants. But almost any political development, such as a policy or regulatory change, could have resulted in costs to Kenyan taxpayers. The PPA also included terms for the document to be kept confidential, leaving those same taxpayers in the dark.

In-Depth Sources

Amu Power and Kenya Power. 2017. ‘Power Purchase Agreement for 981.5 MW Coal-Fired Power Plant.’ Link.

Kurrent Technologies. 2016. ‘Environment and Social Impact Assessment (ESIA) Study for the Proposed 1,050MW Coal Fired Power Plant Project, Kenya.’ Link.

Myllyvirta, Lauri and Clifford Chuwah. 2017. Assessing the Air Quality, Toxic and Health Impacts of the Lamu Coal-Fired Power Plant. Technical Report 06-2017. Exeter, UK: Greenpeace Research Laboratories. Link.

National Environment Tribunal Appeals Registry. ‘Notice of Appeal.’ Received 7 November 2015. Link.

Save Lamu. 2018. Biocultural Community Protocol for Lamu County: The Lamu Indigenous Community and their Rights to the Preservation of their Natural Resources, Cultures, Heritage and Management of Biodiversity. Lamu, Kenya: Save Lamu. Link.

Save Lamu & 5 others v National Environment Management Authority (NEMA) & another [2019] eKLR. Tribunal Appeal No. Net 196 of 2016. National Environment Tribunal, Nairobi. Link.

Save Lamu and Kwasasi Mvunjeni Farmers Self-Help Group. 2019. ‘Complaint Regarding the International Finance Corporation’s Investments in Kenya Commercial Bank and Co-Operative Bank of Kenya.’ Letter to International Finance Corporation, 26 April 2019. Link.

Schlissel, David. 2019. The Proposed Lamu Coal Plant: The Wrong Choice for Kenya. Report, June. Lakewood, OH: Institute for Energy Economics and Financial Analysis. Link.