Economy

AfDB okays Sh12bn loan for low-cost power connection

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Kenya Power workers in Nyali, Mombasa. PHOTO | FILE

Kenya’s plan to cut the cost of connecting new electricity consumers to an average of Sh30,000 moved closer to reality after the African Development Bank (AfDB) approved a $133 billion (Sh11.9 billion) loan for grid expansion.

The loan, whose approval had delayed, will finance the Last Mile Connectivity Project (LMCP) that aims to bring power supply to remote areas and place the bulk of unconnected homes close to the grid.

The project aims to maximise the use of the Kenya Power’s existing 35,000 distribution transformers.

The grid will be combined with Kenya Power’s new transmission design, known as the Single Wire Earthing Return (SWER) system, which will use less cables and small and fewer poles to connect households.

This is expected pull down connection costs from the current average of Sh105,000 for homes seeking supply within a radius of 600m to a transformer.

The LMPC is expected to place the bulk of unconnected households within a 600m radius to an electricity network. 

“Under the initiative, the existing distribution transformers will be exploited to their maximum by extending low voltage networks to households located in the vicinity of the transformers,” said the bank in a statement.

AfDB said the Last Mile project, which is the first phase of a wider initiative, will benefit 314,200 customers or about 1,571,000 people, mostly in remote zones.

“The proposed project will cover the entire country, with selected transformers in 47 counties and expected to directly benefit low income groups, largely in counties with the lowest penetration rate,” said the lender.

The approval by the bank’s board had been expected in September but was delayed for undisclosed reasons.

READ: Kenya Power targets 1 million new connections this fiscal year

The Last Mile project is estimated to cost $147 million (Sh13 billion), with the State contributing the remaining $14 million (Sh1.2 billion).

The entire project will cost $800 million (Sh71 billion) and other lenders including the World Bank and the French Agency for Development have shown interest in funding it.

Lower cost of connection for the LMPC is to be realised through use of single, thinner and lighter cables to connect homes as opposed to the current system that uses two or four cables.

Kenya Power is also planning to cut costs by using smaller poles that will be spaced 100 metres apart instead of the current 50 metres.

“We are going to save on every aspect and this should bring down connection rates within the 600 metre radius to an average of Sh30,000 from the current Sh105,000,” Ben Chumo, the managing director of Kenya Power, told the Business Daily in an earlier interview.

Currently, homes and business outside the 600m radius are charged at market rates that run into hundreds of thousands of shillings.

The project should come as a big relief for rural households that had been left in a tight spot after the Treasury withdrew a Sh2.7 billion subsidy that helped Kenya Power keep connection fees at Sh35,000 for those living close to transformers.

The new grid plans are  expected to boost connections by one million in the current fiscal year, representing a 36 per cent growth on the distributor’s customer base of 2.8 million users.

This is in line with the government’s plan to increase electricity penetration to 70 per cent of households by 2020, up from 32 per cent.