Kenya: Turning the lights back on as power purchase agreement moratorium is lifted

As part of Kenya’s policy on power purchase agreements (PPAs), the National Assembly’s Departmental Committee on Energy (Committee) report titled ‘Report on the Inquiry into the Matter of the Reduction of Electricity Costs in the Country’ was tabled in parliament on 25 November 2024. The report was never passed, however. 

Almost a year later, on 13 November 2025, the Committee tabled the ‘Addendum Report on the Inquiry into the Matter of the Reduction of Electricity Costs in the Country’ (2025 Committee Report), which was adopted by the National Assembly.

With its adoption, the moratorium on PPAs is lifted and with it, comes a proposal to shift to competitive auctions. For developers, lenders, and consumers, this marks the reopening of a long-stalled pipeline at a time when demand is rising and reserve margins are shrinking. The key recommendations of the 2025 Committee Report include the conditions attached to the lifting of the moratorium and the practical implications for project developers, lenders and other sector participants.

During the moratorium, Kenya has effectively lost several years of generation capacity development. A number of projects stalled at various stages of procurement or development, and the country has had to increasingly rely on energy imports to bridge the gap between demand and available local capacity. While regional interconnections with Ethiopia and Uganda have helped to stabilise supply, they were never intended to be a substitute for domestic generation. 

Meanwhile, energy demand has continued to rise. 

Peak demand records are now being challenged and reset on a regular basis, reflecting both underlying economic growth and the electrification of new loads. This has narrowed the system’s reserve margin and reduced the room for unexpected outages or delays in bringing new capacity on stream.

In recent months, both the Kenya Power and Lighting Company Plc (KPLC) and the President have acknowledged that, without additional capacity, load shedding will be necessary to balance the system. These comments provide important context for the National Assembly’s decision to lift the moratorium and to push for a more cost-conscious framework for future PPAs.

The lifting of the moratorium is, however, subject to the following conditions:

Implementation of competitive procurement of energy projects

The Ministry of Energy and Petroleum (Ministry of Energy) and the Energy and Petroleum Regulatory Authority (EPRA) will implement competitive procurement of energy projects under an auction scheme, modelled on South Africa’s Independent Power Producer Procurement Programme. The auction system is required to be operationalised within twelve months after the adoption of the 2025 Committee Report.

A twelve-month window to design and operationalise such a system is highly ambitious.

An effective auction scheme will require a clear institutional framework supported by multi-disciplinary technical teams and transaction advisors to ensure rigorous and defensible project screening, bid evaluation, risk allocation and contract negotiation. Early engagement with developers and lenders is essential to test assumptions, refine auction parameters and ensure that bid conditions do not suppress participation or undermine bankability. Standardised documentation aligned to lender expectations and informed by lessons from existing PPAs will also need to be developed.

Additionally, a credible and transparent auction system is hinged on the clarity and predictability of its governing rules. The National Assembly has directed the Ministry of Energy and EPRA to draft and finalise an approved Renewable Energy Auctions Policy (Auctions Policy) that outlines the transition from the Feed-in-Tariff (FiT) for advanced projects which must also be in line with the gazetted indicative tariffs. A 2021 Auctions Policy already exists. Strengthening and operationalising the existing framework, rather than developing an entirely new policy would provide greater efficiency and better support the timely implementation of the auction scheme.

Competitive sourcing of Battery Energy Storage Systems (BESS)

The Ministry of Energy, in conjunction with EPRA, is incorporating competitive sourcing of BESS capacity into the Renewable Energy Auctions Policy (REAP). 

EPRA has been directed to conduct a market sounding analysis to determine the specific tariffs and costs associated with establishing BESS PPAs based on models from South Africa and the USA and reflect these findings in its gazetted indicative tariffs for wind and solar generation technologies.

This is a more pragmatic approach as opposed to the 2024 Report, which required the mandatory integration of BESS into all existing and new wind and solar projects.

Oversight by the Attorney General of Kenya

All amendments and variations to PPAs will be reviewed by the Attorney General, who will provide legal guidance, advice and support as needed. The Attorney General is expected to deliver such advice within thirty days of receiving any proposed changes.

In our view, the Attorney General’s office will need to be integrated into the negotiation and amendment process from the outset, rather than being brought in only at the final clearance stage. Early involvement will allow the Attorney General to embed Government’s legal concerns into commercial discussions as they evolve, reducing the risk of late-stage objections that could require renegotiation of agreed risk allocations and delay project implementation. This shift from end-point review to continuous engagement is essential to ensure that legal guidance is both timely and aligned with commercial realities.

As an additional layer of oversight, the Ministry of Energy will now submit a consolidated report on all PPA amendments to the National Assembly every six months. A move aimed at enhancing transparency, accountability and alignment with Kenya’s energy policy and public interest.

Publication of indicative tariffs

EPRA will publish indicative tariffs for both FiT and auction projects for different technologies and for BESS, with the same to be reviewed after every three years.

While EPRA has previously issued indicative FiT tariffs, benchmark tariffs for renewable energy auctions, and benchmark geothermal generation tariffs in 2021 and 2024, it is unclear whether these tariffs were anchored on market data or are largely aspirational. There is also uncertainty as to how benchmark tariffs will interface with competitive auctions, given that auction prices are expected to reflect project-specific costs and risk allocation, rather than preset benchmarks.

To ensure that indicative tariffs are credible, they should be competitive and grounded in market realities. To achieve this, EPRA will need to undertake robust cost analysis and comprehensive market sounding before setting or revising the indicative rates. Without a strong analytical foundation, indicative tariffs risk being set too low to attract bidders or too high to ensure value for money.

Currency flexibility

New PPAs to be onboarded to the grid can be denominated in Kenya Shillings, foreign currency, or a hybrid combination. This flexibility better aligns revenue streams with the financing structures typically used in power projects and represents a more pragmatic shift from the earlier recommendation of the draft 2024 report that all new PPAs be fully Kenya-shilling denominated.

Mobilising local currency capital remains a critical objective particularly given the forex pressures associated with PPAs that are fully foreign currency denominated. The growing interest from domestic institutional investors such as pension funds in financing long-term and large-scale projects (such as NSSF investing in the Nairobi-Nakuru-Mau Summit Highway) speaks to expanding financing capacity within the local market which can be directed to the energy projects.

Transparency requirements

New PPAs will only be executed with power generation entities that have fully disclosed and registered their beneficial ownership. The Business Registration Service (BRS) is also required to submit to the National Assembly a report containing a list of the owners, beneficial owners, shareholders, directors of each entity operating as an IPP in Kenya in accordance with section 93A of the Company Act, 2015.

Other Recommendations

Other notable recommendations by the National Assembly include:

Establishment of an Independent Power Producer (IPP) office: The National Assembly recommended the formation and operationalisation of an independent IPP office by the Ministry of Energy in conjunction with the National Treasury and modelled similar to South Africa’s IPP Procurement Programme Offices. The office shall serve as a centralised entity to streamline the review, negotiation and formalisation of PPS. It is to be created within 24 months of adoption of the 2025 Committee Report.

Setting up an independent IPP office will require significant resources and time, from staffing with a multi-disciplinary team to dedicated funding to finance its operations and detailed operating procedures, governance frameworks and procurement manuals to guide its work. Further, for the office to function as intended, it must be established as a standalone entity and not merely an internal department within a ministry. This will ensure credibility, insulation from day-to-day political shifts and the ability to apply consistent technical and commercial standards across all energy procurement transactions.

Timelines for achieving financial closing and the commercial operations date: the 2025 Committee Report recommends that EPRA ensures that financial close and signing of power purchase contracts is achieved within 9-12 months and Commercial Operations Date (COD) within 24-30 months of financial close. Only in exceptional circumstances should EPRA sanction delays in these timelines.

Achieving financial close within 9–12 months will be challenging, particularly because lenders often require utility-scale projects to obtain a Letter of Support (LoS) from the Government prior to financing. From our experience, obtaining a LoS can be a fairly protracted process involving inter-agency negotiations and review. Unless this process is streamlined, developers are likely to face delays that make the proposed 9-12 month window unrealistic.

Similarly, reaching COD within 24–30 months is feasible for some technologies such as solar photovoltaic but will need to be decided on a case-by-case basis.

Construction of transmission lines: fast tracking the completion of priority transmission lines and substations, which are key in reducing technical system losses has been recommended. The Ministry of Energy has also been advised to prioritise transmission infrastructure for near-complete renewable energy projects and to pursue transparent, competitive public private partnership models to ease pressure on the Exchequer and open opportunities for private investment.

Delinking development projects from KPLC to Renewable Energy Corporation (REREC): the National Assembly has also recommended that the Ministry of Energy expedites the process of delinking government development projects from KPLC to Rural Electrification and REREC. This is to allow KPLC to focus exclusively on its commercial mandate namely, the purchase and sale of electricity while REREC oversees government-funded electrification initiatives.

Conclusion

The lifting of the moratorium marks a decisive reopening of Kenya’s power generation pipeline and reflects the government’s urgency to address supply deficits and growing demand. Its practical impact, however, will hinge on how quickly the new conditions, particularly the shift to competitive procurement, are implemented.

We also note that most of the proposed reforms will address medium-long term issues, raising the question of how the current supply shortfall will be managed in the interim. The sector also needs guidance on the transition from the existing procurement framework to the Auctions Policy. For instance, how will the Ministry of Energy, EPRA and KPLC manage projects procured under the FiT regime with approved Expressions of Interest or signed PPAs whose long stop dates have expired or are nearing expiry?

For now, the market remains cautiously optimistic, seeing renewed opportunity in the lifting of the moratorium but remaining conscious of the uncertainties that come with a sector undergoing significant restructuring.

Edwin Baru is a Nairobi-based partner in Bowmans’ Projects, Energy & Infrastructure Department. Aleem Tharani is co-head of the firm’s Infrastructure Sector Group. Beatrice Ngunyi is an associate in the Nairobi office who specialises in project finance, energy, and public-private partnerships.