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KenGen, Kenya Power in new deal for Muhoroni thermal plant
Cabinet Secretary of Energy and Petroleum James Opiyo Wandayi addressing the media during his tour of Muhoroni Gas Turbine (GT) Power Plant in Kipsitet on October 5, 2024.
Kenya Electricity Generating Company (KenGen) and Kenya Power have disclosed a new deal that will see the expensive thermal power plant in Muhoroni, Kisumu County continue supplying electricity to the grid for at least a year.
The electricity-generating firm says it signed a new power purchase agreement (PPA) with Kenya Power on September 26 this year, effectively returning Muhoroni Geothermal Power Plant to the grid after being retired in mid-2023.
According to the firm, the government intervened and allowed KenGen to resume power supply from the 60-megawatt plant in October last year as an interim measure for grid stability. However, it had no formal PPA in place with Kenya Power.
The formal PPA has now been signed, giving KenGen room to continue with the supply for at least a year. The firm has not given details of how the pricing looks in the new PPA, given that the plant was one of the most expensive in the country, supplying power at Sh56.73 per unit.
“The PPA will run for the interim period spelled out in the contract and one year from the signing date. The agreement sets out the commercial and operational terms governing the sale of electricity generated from the plant to Kenya Power,” says KenGen in the latest annual report.
“The signing of the PPA marks a key milestone towards the optimisation and continued utilisation of the Muhoroni facility in line with the company’s strategic objective of enhancing generation capacity and supporting national grid stability.”
KenGen had, in 2023, retired the Muhoroni plant alongside Kipevu I, booking an impairment of Sh899.76 million. The two fossil energy-powered plants had a combined capacity of 133.5 MW.
Now the power-generating company has reversed the Sh201.69 million write-off it had made on the Muhoroni plant since it is now back in operation.
The return of Muhoroni saw thermal electricity units sold to Kenya Power in the financial year ended June 2025 rise by 30 percent to 476 gigawatt hours (GWh) from 365 GWh in the preceding period.
Thermal closed the review period as the energy source with the highest jump in sales, as geothermal and wind dropped by three percent and two percent, respectively. Hydro power grew three percent to 3,448 GWh.
KenGen received formal communication from the Energy and Petroleum Regulatory Authority supporting the immediate resumption of operations at Muhoroni to bring stability to the grid amid a rise in the country's peak demand.
The peak demand has been rising, growing by 9.9 percent to 2,392 MW in the year ended June 2025. An increased peak demand requires additional electricity production, without which power rationing sets in.
The country’s peak demand has been rising over the past five years, moving from 2,177 MW in the year ended June 2024. The peak demand stood at 1,926 MW six years ago. Kenya Power has been warning of power rationing following a four-year freeze on new PPAs that had stopped building new generation plants. Parliament last month voted by acclamation to lift the freeze.
The freeze started in 2021 as part of the outcome of the now-retired President Uhuru Kenyatta-backed task force that was formed to review the current PPAs and recommend a strategy for reducing the cost of electricity.
The Cabinet lifted the freeze in March 2023, but Parliament initially declined to approve the decision, with MPs saying they would only allow removal of the moratorium when the Ministry of Energy puts safeguards against steep charges from independent power producers.
