Kenya Power paid Sh1.96 billion ($15.2 million) to US energy firm Ormat Technology in April and May as part of overdue obligations for geothermal power purchases from the latter’s Naivasha plant, new disclosures show.
The payments helped to reduce a balance of Sh5.78 billion ($44.7 million) that was pending at the end of March, adding to earlier payments of Sh2.58 billion done in January and February. Ormat did not disclose whether there was a payment made in the month of March.
Ormat operates within the Naivasha-based Olkaria III complex through its wholly-owned subsidiary OrPower 4, Inc, which has an output capacity of 150 megawatts (MW) of geothermal power.
The company sells the electricity to Kenya Power under a 20-year power purchase agreement that ends between 2033 and 2036.
“As of March 31, 2025, the amount overdue from KPLC in Kenya was $44.7 million of which $15.2 million was paid in April and May of 2025,” said Ormat in a financial report for the quarter ending March 2025.
“The company has historically been able to collect on substantially all of its receivable balances… (and) believes it will be able to collect all past due amounts from KPLC.”
In addition to the power purchase agreement with Kenya Power, Ormat also holds a letter of support from the government covering certain instances of non-payment caused by government actions and/or political events.
The continued efforts by Kenya Power to pay down its obligations to the US firm have come in a period when the utility is enjoying higher profits due to more favourable market conditions.
The company reported an increase in net profit to Sh9.97 billion for the half year ended December 31, 2024, from Sh319 million in the corresponding period in 2023.
The higher earnings were driven by increased electricity sales, lower cost of sales, and reduced finance costs because of the stability of the shilling against major foreign currencies.
During the review period, Kenya Power’s electricity sales increased by five percent to 5,506 gigawatt hours (GWh) compared to 5,225 GWh recorded during a similar period in the previous financial year.
The Kenya market remains one of Ormat’s most important outside of the US, accounting for 12.2 percent of the firm’s revenue in the first quarter of the year. In the period, Ormat reported total revenue of $229.76 million (Sh29.7 billion), out of which $180.24 million (Sh23.3 billion) was from electricity sales.
The Kenya operation thus contributed Sh2.8 billion to Ormat’s top line electricity sales in the period.
Besides Kenya, Ormat has international operations in Turkey, Guadeloupe, Guatemala, Honduras, and Indonesia.
“A substantial portion of the electricity segment foreign revenues came from Kenya and to a lesser extent, from Honduras, Guadeloupe and Guatemala. Our operations in Kenya contributed disproportionately to gross profit and net income,” added Ormat in the quarterly report.
In total, Ormat currently has a power generating portfolio of approximately 1.4 GW, through geothermal plants in the US, Kenya, Guatemala, Honduras, Guadeloupe and Indonesia. The company also operates energy storage facilities, recovered energy generation and Solar PV power plants in the US.
