A new Energy Bill – which completed its public consultation phase in February 2018 – may result in a significant shake-up of Kenya’s geothermal segment. Significantly, the draft legislation lays out a royalties schedule. The raft of laws has been passed by the National Assembly but was still awaiting Senate approval as of September 2018. The bill will see geothermal firms pay fees of between 1% and 2.5% of the revenues generated from the energy source during their first decade of operation and 5% thereafter.
These efforts form part of a broader strategy to close the country’s structural fiscal deficit by securing new sustainable revenue streams. According to the IMF, the budget deficit stood at 7% of GDP for the FY2017/18 ending in June 2018, although this is down from 9% in the previous year. The government also plans to target the country’s current account deficit, which was 6.7% of GDP in 2017 compared to 5.2% in 2016, according to the IMF.
