IFC, a member of the World Bank Group, in partnership with the Global Agriculture and Food Security Program, PROPARCO, and the Netherlands development finance company FMO, have arranged a $55m loan to the Kenya Tea Development Agency (KTDA).

The financing from the development finance institutions will be used to fund the construction of seven small hydropower projects (SHPs) across tea growing regions.

Suzanne Gaboury, Director of Agribusiness at FMO, said: “FMO is proud to play a part in financing this project that will enable the construction of seven small hydropower plants. After providing long-term finance to KTDA’s microfinance company, Greenland Fedha, in 2014, FMO will now be involved in a project that can generate reliable and clean energy for KTDA’s tea processing factories. It should demonstrate the business case for small-scale renewable energy projects in the region.”

KTDA operates 65 tea processing factories across Kenya, sourcing its tea leaves from 350,000 farmers, who are shareholders in the company, and co-own the factories. Energy accounts for over 30% of costs for the tea factories.

The small hydropower plants developed by KTDA Power will supply 16MW of renewable, affordable power to the tea factories that will help reduce costs and increase savings for the farmers.

The construction of the power plants is expected to create more than 2,000 jobs.

The funding is in line with KTDA's long-term strategy to ensure that tea factories have access to alternative renewable forms of energy that will reduce operational costs in factories.

Lerionka Tiampati, KTDA CEO, said: “Construction of three hydropower projects in Gura, Chania and North Mathioya are at advanced stages, funded by an earlier credit line from AFD (French Agency for Development). With the funding that we have received today, construction works for Nyambunde, Kiringa, Kipsonoi and Nyamasege SHPs will commence in 2016.”

On average, individual tea factories spend approximately Ksh30 million ($290,000) to Ksh65 million annually on electricity, depending on factory size, crop level and the variable costs such as fuel cost adjustment and forex that are used by Kenya Power in the calculation of electricity bills.

Amaury Mulliez, CIO of Proparco, said: “We are very pleased to partner with KTDA, a key player in the tea industry with a unique model based on half a million local farmers. It will further promote sustainability in the Kenyan agricultural sector. By providing reliable and clean energy to tea factories, this project will also reduce the carbon footprint of the country by an approximate 63,000a tons of CO2-equivalent per year.”

According to Oumar Seydi, IFC Director for Eastern and Southern Africa, access to power is one of the key constraints for agriculture in Africa.

"KTDA is innovating to address power shortages by developing its own captive and renewable power supply. Reducing costs of processing will help make Kenya’s tea sector more competitive in a global marketplace and increase revenues for the 560,000 farmers who supply green leaf to the 66 KTDA-managed tea factories,” he said.