- The Nairobi Securities Exchange-listed bank provided the 12-year loan on October 9, 2020.
- Details of the loan are disclosed in Kenya Power’s annual report for the year ended June.
NCBA Bank Kenya #ticker:NCBA has lent Kenya Power #ticker:KPLC Sh6.75 billion, becoming the largest local lender to the electricity distributor by taking over the company’s overdraft facilities.
The Nairobi Securities Exchange-listed bank provided the 12-year loan on October 9, 2020. Details of the loan are disclosed in Kenya Power’s annual report for the year ended June.
“Debt refinancing/restructure has been identified as one of turn around strategies which is being done. Procurement process for the refinancing is currently ongoing. During the current financial year Sh6.7 billion worth of overdraft was converted into a term loan,” Kenya Power says in the report.
“The balance of the overdraft has also gradually reduced with the increased revenue collection. The company has also reduced its dependency on overdrafts.”
The NCBA loan is denominated in local currency and has an interest rate of nine percent –comprising the Central Bank Rate currently at seven percent plus a two percent margin.
NCBA is also paid a loan origination fee which is charged by banks for processing a loan application as a fraction of the total loan value.
Rand Merchant Bank, NCBA and Standard Chartered Plc charged Kenya Power a combined loan origination fee of Sh794.9 million in the year ended June.
The NCBA loan has a repayment moratorium of 36 months from September 2020, Kenya Power said.
Other local lenders that have provided the utility firm with loans include Equity Bank which is owed Sh4 billion.
Kenya Power has also borrowed heavily from development finance institutions and foreign banks. NCBA is the latest to disburse a loan to Kenya Power as the amounts owed to other commercial banks drop on repayments.
The electricity distributor repaid loans worth Sh20.2 billion in the review period, up from Sh12.4 billion the year before.
Kenya Power, for instance, settled Stanbic Bank’s Sh2 billion loans while the amount owed on one of the Standard Chartered Plc’s loans dropped to Sh25.7 billion from Sh29.3 billion. Kenya Power’s new borrowings also dropped to Sh8.5 billion from Sh14.6 billion.
The moves saw its finance costs drop to Sh9 billion from Sh12.4 billion.
“Finance costs registered a 27.5 percent reduction from Sh12.47 billion to Sh9.05 billion due to a decrease in loans and overdrafts as a result of a Sh20.26 billion repayment of commercial loans which included the partial conversion of overdrafts into a term loan,” the utility firm said.
The company, which has been receiving waivers from lenders for breaching liquidity ratios, plans to further renegotiate its debt with an aim of reducing interest expenses and boosting cash flows.
The company invited expressions of interest (EOI) for the commercial debt refinancing in April and request for proposals were issued to the bidders with a closing date of August 6.