Kenya plans revenue royalty fees of up to 2.5% from geothermal power operators

Olkaria III plant by Ormat (source: video screenshot)
Alexander Richter 17 Feb 2018

Proposed new legislation in Kenya, plans to create a royalty fee system on the utilisation of geothermal resources, calculated on the revenues achieved from geothermal power operations.

As reported by Bloomberg this week, Kenyan legislators have proposed a new law that would see the introduction of a royalty fee system for geothermal power operators.

With currently only one private operator generating power from a geothermal power plant it is going to be interesting how this will effect planned and ongoing development efforts by private developers planned before the now planned legislation. It is also not clear if these levies would fall upon the mostly state-owned Kenya Electricity Generating Company (KenGen)

The proposed new law sees the introduction of a 1-2.5% royalty fee of revenue generated from geothermal resources “within the first decade of a geothermal license being issued “, and an increase to between 2 to 5% thereafter.

The piece of legislation now being prepared has been worked on since October 2016 and includes – among others – stipulations that could end the monopoly of Kenya Power related to licensing of electricity distributors and retailers.

According to Bloomberg, “local communities around geothermal wells will receive 5% of revenues from the royalty payments under the proposed law.

KenGen generated around $51 million of revenue from steam power for the first half of 2017.

Source: Bloomberg