Stakeholder perception on the deployment of the emerging financial risk management instrument in public private partnership renewable energy project in Kenya: a case study of Lake Turkana Wind Power Project

Abstract

This study tries to assess the stakeholder perception on the deployment of the emerging financial risk management instrument in Public Private Partnership (PPP) renewable energy project in Kenya, with the case study of the Lake Turkana Wind Power (LTWP) project. The energy demand worldwide and particularly in Kenya is huge, while the depletion of fossil fuels reserves and the impact the use of fossil fuels has on the climate impose an urgency to apply more .alterative power sources in the currently fossil fuels dominated energy markets. Renewable energy is the alternative source of energy that may be able to meet the huge demand of energy on one hand, and the environmental conservation on the other.

Yet, renewable energy project can be an expensive undertaking due to its nature such as immature technology and the unfamiliar risks it bears. Project finance is an alternative in financing infrastructure and risky project in nature. One of project finance methods known as public private partnership can help in dealing with transferring risk to parties that are better in underwriting it as well as in managing the entire parties involve in a more structural way. However, still, risky project with a large scale of investment requires a strong risk management mechanism if it aimed to reach the intended purposes of each party involve. One of effective tools in risk management mechanism is the deployment of financial risk management instruments.

There is a diverse range of financial risk management instruments in the market, both traditional and non-traditional or the emerging one. The adoption of the emerging financial risk management instruments after its pilot study remain unknown. Lake Turkana Wind Power project is one of large scale renewable energy projects in Africa, located in Kenya, which tries to build and meet the quarter portion of electricity deficit in Kenya, if no power generation is built by 2012. This project is currently in the planning stage of project cycle and it is assumed that some financial risk management instruments are taken into consideration to be deployed before the financial closure is reached.

Chapter 2 discusses and presents the literature review and its contribution to provide the context of the research question in a greater detail. Furthermore the research methodology is given in Chapter 3 as well as all the instruments will be used to collect the data for the study purpose. Chapter 4 presents data analysis in frequency tables and its interpretations and thus chapter 5 presents the summary of findings and discussions on the context and the answers to research questions as well as recommendations to all the stakeholders involved.