India’s Adani Group will seek Sh634.7 billion ($4.92 billion) from Kenyans over the next 30 years for building high-voltage power transmission lines, setting the stage for an increase in electricity prices.
The conglomerate, through its subsidiary Adani Energy Solutions Limited, and a unit of the African Development Bank have been awarded a public-private partnership concession to build the power transmission lines for $1.3 billion (Sh167.7 billion).
The firms are expected to recoup their investments through a new charge on households’ monthly electricity bills, said a source at Ketraco, the State agency behind the contracts.
This is likely to put upward pressure on inflation, or the cost of living measure in a country where the cost of power has risen the most relative to basic commodities over the past five years.
Alternatively, the State could opt to pay Adani directly out of taxes to quell public outcry, said the source, marking a departure from PPP deals where private financiers often recoup their investments through avenues such as tolls.
Project costs
A separate plan by the Kenyan government to lease the Jomo Kenyatta International Airport to the Adani Group for 30 years in exchange for a $1.85 billion (Sh238.65 billion) investment to expand the airport has sparked anger among Kenyans and also triggered a strike by the country’s aviation workers.
Besides Adani, the government, through Ketraco, has awarded PPP concessions to Africa50, an infrastructure investment arm of the African Development Bank, to build the new transmission lines.
“Adani has given us a project cost that is broken down into the EPC (engineering, procurement and construction) cost, the cost of wayleaves, the cost of taxes plus project costs. The first offer was $1,014 million (Sh130.96 billion),” said John Mativo, the Ketraco managing director.
“Over the last one and a half months we have managed to reduce the figure to $736 million (Sh95 billion) and we are confident that we can knock off another $40 million (Sh5.1 billion),” added Dr Mativo on Monday during an event where Ketraco sought public opinion on the Adani PPP.
The Indian conglomerate is expected to make outsized profits for 30 years before handing over the lines to the Kenyan government.
It will spend Sh95 billion on capital expenditure and expects to generate revenues of Sh634 billion in the 30 years or Sh21.2 billion annually. This excludes other expenses such as debt, salaries and maintenance costs.
Ketraco is keen on Adani building the lines and substations for Sh94.5 billion and expects revenues of Sh404.3 billion or Sh13.4 billion annually, according to documents seen by the Business Daily.
Adani wants to finance the project with 70 percent debt and 30 percent equity, but Ketraco wants the Indian firm to increase the debt component to 75 percent as it is cheaper than equity.
Under the PPP deal, Adani wants to construct two power transmission lines and two substations. These include a 206km 400kV Gilgil-Thika-Malaa-Konza transmission line, which will boost power supply around Nairobi. The line is expected to be completed in 2027.
It will also build the 70km 132kV Menengai-Ol Kalou-Rumuruti transmission line that will extend high voltage to Ol Kalou and provide an alternative evacuation route for the Menengai geothermal complex. The line is slated for completion in 2028.
Adani will also build two power stations—the 132kV Thurdiburo substation and the 400/220/132kV substation at Rongai—both set to be complete by 2028.
Currently, Kenya is using taxes and debt to build the high-voltage lines through Ketraco.
But with little room for additional borrowing, the State is turning to PPPs to bridge the infrastructure gap.
Kenya Power pays Ketraco a fee known as a wheeling charge for the use of the high-voltage lines at Sh0.82 per unit of power consumed by homes and businesses.
The utility firm paid Ketraco a wheeling charge of Sh2.72 billion in the year to June 2023.
“Once we get the total numbers (of the total project cost) after negotiations, we will go to Epra for a tariff,” said Dr Mativo, referring to the Adani’s wheeling charge.
Adani has renewed its international expansion efforts, including a port deal in Tanzania this year, after damaging allegations of fraud by US short-seller Hindenburg Research, which the group has repeatedly denied.
The conglomerate, founded by Gautam Adani, has developed its businesses in tandem with infrastructure goals set by Indian Prime Minister Narendra Modi. But Adani’s overseas operations have been criticised and suffered setbacks. The group pulled out of Myanmar following the 2021 coup, while its ports and energy agreements in Sri Lanka and Bangladesh have fuelled local resentment.
