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REPUBLIC OF KENYA 
Sessional Paper No. 3 of 1971 
KENYA GOVERNMENT GUARANTEE OF A LOAN TO THE TANA 
RIVER DEVELOPMENT COMPANY LIMITED BY THE INTERNATIONAL 
BANK FOR RECONSTRUCTION AND DEVELOPMENT, AND OF 
CERTAIN OBLIGATIONS OF THE EAST AFRICAN POWER AND 
LIGHTING COMPANY LIMITED TO THE IBRD 
SESSIONAL PAPER NO. 3 OF 1971 
KENYA GOVERNMENT GUARANTEE OF A LOAN TO THE TANA 
RIVER DEVELOPMENT COMPANY LIMITED BY THE INTERNATIONAL 
BANK FOR RECONSTRUCTION AND DEVELOPMENT. AND OF 
CERTAIN OBLIGATIONS OF THE EAST AFRICAN POWER AND 
LIGHTING COMPANY LIMITED TO THE IBRD 
THE GUARANTEE (LOANS) ACT. 1966 
In accordance with section 5 of the Guarantee (Loans) Act, Cap. 461, the 
following information is laid before the National Assembly in connexion with a 
proposed guarantee by the Government of the obligations of the Tana River 
Development Company Limited in respect of a loan of US $23,000,000 the 
equivalent of approximately K£8,214,286 by the International Bank for 
Reconstruction and Development to be used for the development of new 
generating capacity at Kamburu on the Tana River, and of the obligations of 
the East African Power and Lighting Company Limited under a joint financing 
agrement with the IBRD relating to this project. 
The present power generation capacity in Kenya amounts to approximately 
158 MW of which 63 MW are installed in three hydro electric stations on the 
Tana River. In addition to its own generating capacity Kenya also imports a 
30 MW bulk supply from Uganda. It is estimated that maximum power demand 
which stood at 125 MW in 1970 will continue to grow in the next 15 years at an 
annual rate approaching 12 per cent. 
To help meet such growth in power demand until 1986, two additional hydro 
electric generating stations with a capacity totalling 140 MW are contemplated 
on the Tana River. Unfortunately, however, cost estimates for such new 
generating· facilities are high, being in the range of US $500 to US $600 per 
l:ilowatt installed. 
Such high costs for hydro power development. coupled with the existence of 
promising geothermal surface manifestations in the Rift Valley, have suggested 
the need for exploring Kenya's geothermal potential as a more economic alter­
native source to meet the country's growing power demand. An exploration 
project has already been mounted but it will be some time before the feasibility 
of economic exploitation of the geothermal potential can be established and 
plans developed for harnessing the latent power. In the meantime, however, it is 
necessary to ensure an immediate increase in Kenya's power output. For this it 
has been necessary to seek external finance, of which the proposed loan by the 
International Bank for Reconstruction and Development forms the greater part 
and in respect of which a guarantee by Government is required. 
Until recently the generation of power in Kenya was undertaken by private 
companies which were partly foreign-owned. In view of the undesirability of 
this both politically and economically, the Government decided to assume full 
responsibility for the development of m:w power sources and to acquire majority 
control of the East African Power and Lighting Company Limited. Consequently 
all the shares of the Tana River Development Company Limited have been 
acquired by Government and the Company is to become the vehicle for imple­
menting Government policy as· enunciated above. 
The project itself consists of the first stage of the Kamburu Hydro Electric 
Power Station on the Tana River with an installed capacity of 60 MW (2 x 30 MW 
Units) together with related step-up station, the construction of a 220 kV. single 
circuit transmission line of about 105 km. in length from Kamburu to the tapping 
point for the proposed new Nairobi substation and a 132 kV. single transmission 
line of about 1.2 km. from this point to the existing Juja substation, and the 
construction of a 132 kV. single circuit transmission line of about 14.5 km. in 
length from Kamburu to the existing 132 kV. step-up substantion at the Kindaruma 
Hydro Electric Power Station. Provision is also made for necessary extensions to 
the existing Kindaruma and Juja Road substations and the proceeds of the loan 
will also be used to pay for the services of consultants to carry out engineering 
design and supervision of construction of the Project which is expected to be 
completed by the middle of 1974. 
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The loan will be used to defray the greater part of the foreign exchange content 
of the Project together with a Swedish credit to Government for on-lending to the 
Tana River Development Company Limited of Swedish Kronor 31,500,000 
equivalent approximately to US $6,000,000 and the K£2,142,540 Funds will be 
made available by the East African Power and Lighting Company to meet local 
costs. 
The loan is for a period of 25 years. Principal repayments are made semi­
annually commencing on 1st July, 1975 and terminating on 1st July, 1996. The 
rate of interest applicable in accordance with the unvarying practice of the Inter­
national Bank for Reconstruction and Development will be the Bank's ruling rate 
at the time the loan agreement and guarantees are signed : currently the rate is 
7t per cent per annum. The general terms of the loan and the various convenants 
required of the Company as borrower and of the Kenya Government as guarantor 
are in accordance with the normal practices of the International Bank for 
Reconstruction and Development and are on lines similar to those applicable to 
loans made in the past and guaranteed by Kenya. 
In addition, Government is asked to guarantee certain obligations of the 
E.A.P. & L. Co. Ltd. to the JBRD under a joint financing agreement relating 
to the project. These obligations relate to the management, profitability and 
financial position of the East African Power and Lighting Company Limited and 
include the making by East African Power and Lighting Company Limited to 
the TRDC Ltd. of a loan of K.Sh. 81,300,000 on terms satisfactory to the Govern­
ment and the Bank, to assist in the financing of the project. 
The current total contingent liabilities of the Kenya Government in respect 
of guarantees given under section 3 of the Guarantee (Loans) Act (other than 
those specified in the Schedule to the Act) inclusive of the guarantees sought to 
be given under Sessional Papers Nos. 1 and 2 of 1971 amounts to K£58,691,674. 
With the guarantee of K£8,214,286 proposed the aggregate will be increased 
to K£66,905,960 of which K£24,738,846 will fall within paragraph (a) and 
K£42,167,l 14 within paragraph (b) of section 3 (3) of the Act. 
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