Kenya's energy renewal gets support from government loan of Sh 87 billion - Business Daily

Kenya’s energy renewal gets support from government loan of Sh 87 billion – Business Daily


Kenya’s energy renewal gets boost from Sh 87 billion state loan


Energy technicians in Kenya replace wooden poles with concrete ones along Nyerere Street in Mombasa. picture | Kevin Odette | NMG

Kenya Power is one of the beneficiaries of a NIS 86.95 billion government loan obtained from international lenders in an effort to support the transformation of the energy utility.

Treasury documents presented in Parliament show that Kenya benefited from the Agency for International Development in the amount of 60.29 billion shillings ($520 million) and 26.667 billion shillings ($230 million) from the International Bank for Reconstruction and Development (IBRD) on March 18.

However, the Treasury did not disclose how much Kenya Power would receive, saying the money would be used to support the facility’s finances.

Also read: Kenya Power to ease compensation for power outages

Kenya Power is set to hit Sh26 billion in the current financial year due to the 15 per cent cut on electricity charges, prompting the state to step in to reduce the impact of the cuts and keep the company on a profitability path.

The facility also needs funds to refurbish its dilapidated transmission network to keep pace with increasing demand, and is also preparing for cash buffers given the looming hit to its revenue from the 15 percent reduction in the cost of electricity.

“The purpose of the loan is to provide funding to support a program whose work includes electricity sector reforms and public-private partnerships to enhance basic facilities (KPLC),” the Treasury says in the documents.

The company’s management said the 15 per cent cut in electricity charges implemented in January would lose up to Sh26 billion in revenue. The estimate does not include an additional 15 percent cut to be made before the end of June.

“15 per cent power cut If you look at the financials for last year, the upper limit was Sh144 billion, then do 15 per cent of that and you end up at Sh25 or 26 billion. Cutting back on energy, Kenya Power said in March Tariffs of 15 percent on the end user will be in that region.

Kenya Power’s turnaround continued when its net income increased 27.6 times to Sh 3.8 billion in the six months to December from Sh 138 million a year earlier. The impact of the 15 per cent reduction will be reflected in full year performance.

The company needs the cash to modernize its systems, reduce the endless power outages attributed to its aging infrastructure and also cater to the growing customer numbers. Kenya Power added 317,296 customers in the six months to December, taking its customer base to 8.59 million from 8.27 million in June last year.

Also read: Kenya Power to pay 1 billion shillings to US energy company Ormat

Kenya Power last year was forced to write off 15 billion shillings of bad debt from unpaid electricity bills, most of which had been outstanding for more than three months.

The state-owned electricity distributor has been losing billions of shillings in uncollected revenue since the company distributes electricity before it collects it.

Households or domestic energy users top the list of defaulters with about 60 percent of bills owed among domestic customers, 20 percent of small and medium-sized businesses and 10 percent of commercial businesses.

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