Eco Securities Group Ltd Environmental Finance Solutions Olkaria

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Olkaria III Geothermal Project, Kenya § 51 MW geothermal project connected to Kenyan grid §Expected output of 411 GWh per annum §Located on the Southern side of Lake Naivasha, in the Rift Valley Province of Kenya §Project developers - Ormat International Inc. §Kenya ratified the Kyoto Protocol in August 1994 §Geothermal power is on the Kenyan Government’s ‘positive’ CDM project list §Construction is expected to commence January 2003 §Expected first period of delivery is last quarter of 2004 Eco. Securities Group Ltd. 2002 All Rights Reserved -1 -

Kenyan Electricity Grid Kenyan grid has a capacity of just over 1000 MW 2/3 of this is hydro-electricity Drought over 3 consecutive seasons led to serious power shortfalls in 2000, leading to the installation of emergency power projects (predominantly diesel) Also multilateral credit withdrawn in 1992, delaying the implementation of projects Consequently, Kenyan Government encouraging: § IPPs § Indigenous energy sources § Diversification away from hydro Eco. Securities Group Ltd. 2002 All Rights Reserved -3 -

Kenyan Least Cost Expansion Plan The plan recommends hydro, diesel and geothermal additions and: § The closure of the Kipevu 75 MW fuel oil fired plant from 2005 IF committed projects come online. § Diesel will act as a stop-gap if additional generation is not implemented as anticipated § The Expansion Plan recommends contract extensions up to 2019 for existing PPAs (includes 105 MW of emergency diesel) § Plans to import 120 MW from 2006 (20 MW from Uganda, 100 MW from South Africa) Olkaria III will NOT displace capacity additions planned to come online, or imports of electricity from Uganda and South Africa If any of the capacity additions do not go ahead (including Olkaria III) then existing thermal capacity will continue to be used Eco. Securities Group Ltd. 2002 All Rights Reserved -4 -

Baseline Scenarios Baseline Scenario 1: Continued operation of the 75 MW fuel oil fired Kipevu plant CEF 777 t. CO 2/GWh Baseline Scenario 2: Continued operation of diesel plants (total of 105 MW under stop-gap PPAs) CEF 849 t. CO 2/GWh Baseline Scenario 1 was chosen because plant already belongs to Govt, does not require additional PPA to continue operating, most conservative. Project Scenario: Implementation of 51 MW geothermal project CEF 143 t. CO 2/GWh Eco. Securities Group Ltd. 2002 All Rights Reserved -5 -

Calculating Emission Reductions Baseline Emissions per year = Total Project Electricity Output (GWh) X Annual baseline emissions = 411. 3 GWh * 777 t. CO 2/GWh = 319, 581 t. CO 2 Kenya grid CO 2 emissions factor (777 t. CO 2/GWh) Project Emissions per year = Total Project Electricity Output (GWh) X Project CO 2 emissions factor (143 t. CO 2/GWh) Annual project emissions = 411. 3 GWh * 143 t. CO 2/GWh = 58, 816 t. CO 2 Baseline Emissions over crediting lifetime (10 years) = 319, 581 t. CO 2 * 10 = 3. 2 million t. CO 2 Project emissions over crediting lifetime (10 years) = 58, 816 t. CO 2 * 10 = 588, 160 tonnes t. CO 2 Therefore total emission reductions = 2. 6 million t. CO 2 over 10 years Eco. Securities Group Ltd. 2002 All Rights Reserved -6 -

Environmental and Socioeconomic Impacts Environmental An EIA was conducted and approved by the relevant authority. The EIA covered: Reinjection of geothermal brine: not hazardous Gaseous pollution: no significant risk posed Seismic activity: Reinjection of fluids will minimise seismic risks, EIA states increased risk minimal Socioeconomic Increased energy security Reduced use of foreign exchange for purchasing petroleum products Increased employment opportunities Improved infrastructure such as roads Increased income and standards of living Capacity building and technology transfer benefits Visual impacts: All located at one site, impact minimal Eco. Securities Group Ltd. 2002 All Rights Reserved -7 -

Conservative baseline §Oeko model CEFs used for baseline scenario, assumed good operating conditions. Kipevu commissioned in 1977. §Emissions deducted in the project case, evidence to suggest these emissions would have been emitted in the baseline case. §Although baseline scenario 1 chosen, it is likely that the project will displace some diesel generation. §Evidence from tester phase to suggest the project will operate at a higher capacity than anticipated. Eco. Securities Group Ltd. 2002 All Rights Reserved -8 -