A World Bank-backed guarantee fund has disclosed a Sh23.21 billion ($179.64 million) guarantee to Koko Networks, to cushion the energy firm against risks as it expands in the Kenyan market.
Multilateral Investment Guarantee Agency (MIGA)— the guarantee arm of the World Bank— said the security, agreed in March this year, will run for up to 15 years and covers Koko against civil strife, seizure of its land for public use and breach of contract in its Kenyan operations.
Koko locally produces and sells bioethanol cooking fuel and stoves to homes especially in the low-income settlements of urban centres and targets an aggressive expansion to add at least three million customers by 2027. The company also sells carbon credits.
The company— headquartered in Mauritius— started its operations in Kenya six years ago and had over one million customers in March this year, who are served by an estimated 4,000 points of refuelling (KokoPoints).
“MIGA’s guarantee will enable Koko to expand its clean cooking solutions in Kenya, reducing greenhouse gas emissions and improving the livelihoods of lower-income households through access to affordable, renewable energy,” MIGA Executive Vice President Hiroshi Matano said when the deal was agreed.
“MIGA’s guarantees have enabled risk-exposed energy infrastructure to be built in emerging markets for over 40 years, and we are proud to be the first MIGA policy covering the unique political risks associated with the Paris Agreement carbon markets,” Greg Murray, CEO and co-founder of Koko added.
Violent protests that could lead to vandalism of facilities especially in areas close to slums and land feuds in cases where the government seeks to repossess land are a headache to investors, underscoring the importance of MIGA’s guarantee.
MIGA’s breach of contract cover protects Koko’s carbon credits against the risk of the Kenyan government failing to uphold their legally binding commitments under Article 6 of the Paris Agreement.
Koko sells carbon credits and uses the process as a non-government energy subsidy to lower the prices of the bioethanol and cooking stoves that they sell in Kenya.
Under Article 6, countries are allowed to transfer carbon credits earned from the reduction of greenhouse gas emissions to help one or more countries meet their climate targets.
Koko’s project in Kenya is key in boosting the government’s efforts of expanding the use of clean cookstoves, in line with World Bank Group’s Climate Change Action Plan 2021-2025.
The energy solutions firm plans to add at least three million households nationwide by 2027, in what will bring its customer base in Kenya close to five million.
Customers refill their containers at KokoPoints —cloud connected fuel automated teller machines that are in corner shops across low-income neighbourhoods.
Most of these shops are owned and operated by female entrepreneurs who have signed deals with Koko as part of plan to economically lift women.
Besides Kenya, Koko also has a presence in Rwanda. Some of the key investors in the company, which was founded in 2014 include Mizuho Bank of Japan and Rand Merchant Bank of South Africa.
