Financial viability of developing 35 MW of geothermal power at Menengai field, Kenya

Abstract

Developing a geothermal project from the initial stage to the operation stage is difficult, complex, expensive and time consuming. Most investors and independent power producers in the geothermal sector prefer a viability assessment to be undertaken and a decision made based on the assessment’s results which include investment advantages and the risks involved in the project. Currently, the Geothermal Development Company (GDC) is developing a 105 MW (3 x 35 MW) geothermal project in the Menengai geothermal field in Kenia. The purpose of this study is to present a financial viability assessment for the development of a 35 MW single unit at the Menengai geothermal field by using an Excel based profitability model. The calculated internal rate of return obtained from the model for the total cash flow and net cash flow are more than the total marginal attractive rate of return of 10% and the equity discounting rate of 15%, respectively. That fulfils the criteria that the internal rate of return should be greater than the marginal attractive rate of return. Based on the results of the model, the project is viable and worth investing.