What Lake Turkana Wind Power Teaches Us About Financing at Scale
read time: 5 minutes
Welcome to the Spotlight Series of the Great Green Migration, a paid (free for now) weekly newsletter where I step inside the success of a standout African green finance project extracting lessons learnt and lessons for replication for you.
A Quick Look at Today's Newsletter:
Africa attracts only 3.6% of global climate finance despite being the region most vulnerable to climate change
Lake Turkana Wind Power became Africa's largest wind project through masterful risk engineering
The EUR625 million project's blended finance structure offers a replicable template for climate bankability
5 important lessons for developers and policymakers in search of climate capital at scale
Africa's Climate Finance Paradox
Africa faces the world's most severe climate impacts.
Yet attracts the smallest share of climate capital.
In 2022, Africa received just 3.6% of global climate finance, a mere USD47 billion, despite being the continent most vulnerable to changing rainfall patterns and extreme weather events. This is both unfair and economically irrational.
The Lake Turkana Wind Power (LTWP) project in Kenya's remote desert proves there's a different path forward.
This EUR625 million mega-project became Africa's largest wind farm and Kenya's biggest private investment in history. More importantly, it created a template for turning Africa's climate potential into bankable reality.
Why Africa Gets Left Behind
Africa needs approximately USD250 billion annually in climate finance by 2030 to meet its climate goals. Current flows are barely 25% of what's required.
One big problem Africa faces is that private sector finance accounts for only 18% of Africa's climate flows, the lowest share globally. Although private climate finance almost doubled between 2019 and 2022 to reach USD8 billion, this pales compared to the capital flowing to other regions.
We have project potential and, often, political will. The missing ingredient is bankability.
Without properly structured, de-risked, investor-ready projects, climate capital will continue flowing elsewhere. Bankability turns promising ideas into fundable realities by tackling every risk that keeps commercial investors awake at night.
Anatomy of the Lake Turkana Wind Power Mega Deal
The Lake Turkana Wind Power story began in 2006 when Dutch entrepreneur Willem Dolleman recognized the region's extraordinary wind conditions.
A conversation between friends turned into a 13-year journey of partnership planning and risk management.
By 2009, Aldwych International joined as co-developer and serious discussions with Kenya Power began. The big step forward came in 2010 with a signed Power Purchase Agreement (PPA), which was reaffirmed in 2011. Financial close came in 2014 and construction began soon after in October. By 2016, the first turbines had started spinning.
The project's final commissioning in 2019 marked the completion of Africa's largest wind farm. But it also demonstrated that properly structured climate projects can attract institutional capital at record scale.
Today, LTWP's 365 turbines generate an average of 199 megawatts, 64% of installed capacity, powering Kenya's national grid while preventing thousands of tonnes of carbon emissions annually.
What Made It Bankable
LTWP's success was as a result of careful risk engineering across every dimension that typically scares away commercial investors.
Blended finance architecture
The project's EUR625 million capital structure followed a proven formula.
It consisted of 70% senior debt, 25% equity and 5% mezzanine debt. This was deliberate optimization of risk allocation across different investor types.
Senior debt came from a consortium of development finance institutions and commercial banks including the African Development Bank, European Investment Bank, Standard Bank and FMO. Equity partners included project sponsors KP&P Africa and Aldwych International, alongside strategic investors like Vestas Wind Systems and Nordic development funds.
Risk guarantees that worked
The African Development Bank's EUR20 million Partial Risk Guarantee (PRG) proved crucial.
It covered delays in government-built transmission infrastructure. This was the first deployment of the African Development Fund's PRG instrument, specifically designed to protect private investors from government performance risk.
The guarantee tackled a huge challenge for private investors.
They can't control government delivery timelines, but they bear the consequences of delays. The guarantee made the project financeable for commercial lenders by transferring this risk to the AfDB.
Early-stage grant finance
The EU and Netherlands provided EUR35 million in grants.
This was divided into EUR25 million from the EU Africa Infrastructure Trust Fund and 10 million from the Dutch government. These grants absorbed early-stage development risk that commercial capital won't touch covering feasibility studies and environmental assessments.
Revenue certainty through PPAs
Kenya Power's long-term PPA provided the revenue certainty essential for project finance.
Without predictable cash flows, even the best-structured projects remain unbankable.
Every risk had a counterweight. Every uncertainty had a mitigation strategy. That's what created bankability.
Partnership Planning
LTWP succeeded through designed stakeholder coordination that aligned incentives across public and private sectors.
Development finance institution leadership
The African Development Bank served as lead arranger.
It leveraged its reputation and relationships to crowd in other lenders. DFI participation signals due diligence and political risk management that commercial investors rely on in frontier markets.
Strategic equity partnerships
Vestas played dual roles as turbine supplier and equity investor.
They aligned technology provider incentives with project success. This model reduces technical risk while strengthening supplier commitment to performance.
Government infrastructure delivery
The Kenyan government, through KETRACO, delivered the 438-kilometer transmission line.
The line connected the remote wind farm to the national grid. This public infrastructure investment was essential for project viability but required coordination with private sector construction timelines.
Donor support for viability gaps
European donors provided concessional finance and grants that bridged the gap between commercial viability and development impact. This catalytic capital made the project attractive to commercial investors while delivering climate benefits.
Capital follows structure. Structure follows trust. Trust follows partnerships.
A Checklist for Replicability for Developers and Policymakers
LTWP's success offers a practical toolkit for replicating climate bankability across Africa.
Thorough project preparation
Conduct comprehensive feasibility studies and social consultations before seeking financing. LTWP faced several land rights and community buy-in challenges that required careful management throughout development.
Bankable revenue model
Negotiate long-term PPAs with creditworthy off-takers. Revenue certainty is non-negotiable for project finance, especially in markets perceived as high-risk.
Blended capital structure
Combine commercial debt, equity, concessional loans and grants to optimize risk allocation. Different capital types serve different functions. Grants absorb early risks while commercial capital provides scale.
Risk mitigation instruments
Deploy partial risk guarantees and currency hedging to address specific investor concerns. Every identifiable risk needs a mitigation strategy.
Strong partnership structure
Engage reputable development finance institutions and committed public sector partners. Clear roles and responsibilities prevent coordination failures that can disrupt complex projects.
Government alignment and infrastructure
Ensure projects align with national energy strategies and that governments commit to enabling infrastructure delivery. Private investors can't substitute for public sector responsibilities.
Scale or Fail
If Africa is to jump ahead into a climate-resilient, low-carbon future, the continent needs 100 more Lake Turkana Wind Powers.
The project’s megawatts generated and carbon emissions avoided are important successes.
But the proof of concept it has created for African climate bankability is its biggest success.
That’s all for today.
Talk to you next Saturday.