Geothermal handbook: PlanninG and Financing power Generation t e c h n I c a L r e p o r t 2 / 2

B O x 3 . 9
The Public-Private Choices in the World Bank Supported Kenya 
Electricity Expansion Project
With an appraisal document dated May 2010, the Olkaria IV geothermal project is a recent World Bank supported 
energy project in Kenya. The first and largest component of the project is the expansion of geothermal power 
generation capacity at two fields in the Olkaria volcanic complex. In designing the project, the Bank and the 
Government considered and rejected the alternative of private rather than public sector financing for development 
of the Olkaria I and IV geothermal fields. In the case of Olkaria IV, the Government of Kenya and the Bank 
considered having GDC develop geothermal resources and then offering proven steam resources to the private 
sector for development on a competitive basis. The government and the Bank rejected this alternative design 
because the large size of the Olkaria IV part of the project (costing about US$ 0.5 billion) made it extremely risky 
for the private sector, and because the government was not prepared to provide the guarantees that the private 
sector would demand to develop Olkaria IV.
Source | World Bank 2010a.
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In Indonesia, very little geothermal steam development has happened since the 1990s as many private owners who have been granted 
concessions continue to perceive the likely payoff from steam development as too limited for the risk involved (Ibrahim and Artono 2010). 
In those cases where geothermal steam development has become commercially viable (e.g., the Philippines), large volumes of official 
development assistance combined with government guarantees were initially required for exploration and reservoir delineation (Dolor 2006).
C h a p t e r 3
However, apart from cases of exceptionally large project size as in the Olkaria example, the chance 
of a private solution is much better for the power generation part of the project than for its upstream 

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G e o t h e r m a l H a n d b o o k : P l a n n i n g a n d F i n a n c i n g P o w e r G e n e r a t i o n 
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Surface studies may be as low as US$ 200 thousand so financing for them may be reasonably straightforward.
phases. Once the resource parameters are established and deemed sufficiently attractive, a 
geothermal investment resembles a typical power generation investment with a high upfront capital 
cost followed by long-term, steady cash flows and relatively little operating risk. 
A properly developed geothermal project has the potential to generate base-load renewable energy 
for over 30 years, promising a return that may be attractive to a private investor with a long term 
horizon. Beyond addressing the resource risk, the case for public support is reduced to the role of 
government in providing the supportive policy and regulatory environment. This role need not involve 
explicit commitment of public funding. However, the government still has a vital role as a guarantor 
of the appropriate pricing and contracting mechanisms, including putting in place mechanisms that 
provide the private sector with the comfort that the off-take obligations would be honored by the buyer.