Kenya Power gets Sh3.3bn loan for new connections

Kenya Power has received a Sh3.3 billion loan from the French Development Agency (AfD) to partly finance connection of at least 300,000 new households.

The cash will be used for advancing Stima Loans to new customers who would otherwise not afford upfront payment of the Sh35,000 connection charges.

The power distribution company received the money through the government, to be used as a revolving fund for five years.

“The company received an additional €30 million from AfD towards the revolving fund, and about 27,178 customers were connected from the proceeds of the facility, which is expected to benefit about 330,464 customers over a five year period,” says Kenya Power in its recently released annual report.

Commercial services chief manager Rosemary Gitonga, said that new customers are expected to pay at least 20 per cent of the connection fee, currently Sh35,000, before they are loaned out the remaining amount.

The loan amount is repayable over a period of 24 months with the monthly instalment loaded onto monthly electricity bills.

Amounts repaid each month are consolidated and offered as loans to other households. The loan does not attract interest but a one off management fee of two per cent.

In 2010, Kenya Power received Sh495 million (€4.5 million) from AfD through the government.

During the pilot period 27,178 customers were connected from the proceeds of the fund.

Kenya Power it is yet to receive the amount from the Treasury, which is said to be considering charging an interest on the amount received as a grant from AfD. Kenya Power is opposed to the interest charge.

The electricity supplier also connected 3,769 customers through a separate loan financing arrangement with Equity Bank.

Under the arrangement with Equity, Kenya Power helps the lender to collect monthly instalments from customers who are connected through a loan offered by the lender.