Olkaria VII geothermal power project has stalled following a donor funding dispute that has disrupted procurement, delayed implementation, and raised fresh concerns about financing risks in Kenya’s energy construction pipeline. The 80.3MW geothermal development, planned in Naivasha within the Olkaria field, had aimed to expand Kenya’s baseload renewable capacity. However, disagreements between the financier and project stakeholders have halted progress, affecting timelines and contractor mobilization. Moreover, the delay has triggered wider concern across the construction sector, particularly regarding donor-funded infrastructure projects that depend on strict compliance and approval frameworks.
Olkaria VII geothermal power project funding dispute halts progress
The Olkaria VII geothermal power project encountered a major setback after the European Investment Bank declined to issue a “no objection” to a key consultancy tender. Consequently, the project could not proceed to the next implementation phase. KenGen had identified a joint venture between Sintecnica Engineering S.R.L. and Steam S.R.L. for consultancy services. However, the financier withheld approval, citing concerns over procurement processes and compliance requirements.
As a result, the absence of funding clearance forced the project developer to terminate the tender in early 2026. This decision aimed to avoid financial exposure and ensure adherence to donor conditions. Meanwhile, early-stage construction activities have not commenced, leaving the project effectively frozen. Therefore, timelines for completion, previously targeted around 2027, now require revision.
Olkaria VII geothermal power project faces legal and procurement hurdles
The Olkaria VII geothermal power project dispute escalated into legal proceedings after affected bidders challenged the tender termination. Initially, the Public Procurement Administrative Review Board ruled in favor of continuing the procurement process. However, the High Court overturned that decision, affirming that donor approval remains a mandatory condition. Consequently, proceeding without confirmed financing would violate procurement and budgetary regulations.
Furthermore, the ruling reinforced the importance of aligning donor requirements with national procurement laws. As a result, the project remains suspended until financing issues are resolved. At the same time, contractors and consultants linked to the project continue facing uncertainty. Therefore, industry players have delayed commitments pending clarity on funding and procurement direction.
Sector implications as negotiations continue
The ongoing dispute highlights broader risks associated with donor-funded construction projects. Consequently, reliance on external financiers exposes infrastructure development to delays when disagreements arise. In response, stakeholders are exploring alternative funding strategies, including government-backed financing and private sector participation. Additionally, resolving the dispute with the European Investment Bank remains a priority.
Despite the setback, the project retains strategic importance for Kenya’s energy mix. Geothermal power provides reliable baseload electricity, supporting industrial growth and reducing dependence on hydropower. Ultimately, progress on the Olkaria VII geothermal power project will depend on successful negotiations and financing restructuring. Therefore, timely resolution remains critical to restoring momentum.
The project aligns with broader industrialization plans in Olkaria, where Kenya is developing a geothermal-powered industrial ecosystem to attract energy-intensive investors and manufacturing activities, as highlighted in KenGen Green Energy Park. The initiative is designed to leverage reliable geothermal energy to drive sustainable industrial growth and position the country as a regional hub for green manufacturing.
Project Fact Sheet
Project Name: Olkaria VII Geothermal Power Project
Location: Olkaria, Naivasha, Nakuru County, Kenya
Project Value: $250 million (KES 32 billion)
Capacity: 80.3 MW
Sector: Energy / Renewable Power (Geothermal)
Project Type: Greenfield geothermal power plant
Client/Developer: Kenya Electricity Generating Company (KenGen)
Financing:
- European Investment Bank (EIB) – primary financier (pending approval)
- Government of Kenya – support role
- Potential co-financiers under consideration
Current Status (2026):
- Procurement halted
- Consultancy tender terminated
- Project on hold due to funding dispute
Scope of Works:
- Drilling and development of geothermal wells
- Power plant construction (80.3 MW capacity)
- Steam gathering system
- Transmission interconnection infrastructure
- Ancillary facilities and support systems
Timeline:
- Approval and planning: 2025
- Expected construction start: Delayed
- Initial completion target: 2027 (subject to revision)
Key Challenges:
- Donor approval delays (“no objection” requirement)
- Procurement compliance disputes
- Legal challenges and court rulings
- Financing uncertainty
Project Team
Project Developer: Kenya Electricity Generating Company (KenGen)
Financier: European Investment Bank (EIB)
Government Stakeholders:
Proposed Consultancy (Tendered):
- Sintecnica Engineering S.R.L. (Italy)
- Steam S.R.L. (Italy)
Regulatory Authorities:
Legal & Oversight Bodies:
Contractors: EPC contractor not yet appointed due to stalled procurement
