Kenya Power revamp gets boost in Sh87bn State loan


Kenya Power technicians replace the wooden posts with the concrete ones along Nyerere Avenue in Mombasa. PHOTO | KEVIN ODIT | NMG

Kenya Power is one of the beneficiaries of an Sh86.95 billion State loan tapped from two international lenders in efforts to support the power utility’s turnaround.

Treasury documents tabled in Parliament show that Kenya tapped Sh60.29 billion ($520 million) from the International Development Agency (IDA) and Sh26.667 billion ($230 million) from International Bank for Reconstruction and Development (IBRD) on March 18.

The Treasury did not, however, disclose the amount Kenya Power will get, saying that the funds will be used to shore up the utility’s finances.

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Kenya Power is set to take a hit of up to Sh26 billion in the current financial year due to the 15 percent cut on power tariffs, prompting the State’s intervention to reduce the impact of the cuts and keep the company on profitability path.

The utility also needs funds to revamp its dilapidated transmission network to keep up with the growing demand and is also bracing for cash buffers given the looming hit on its revenues due to the 15 percent reduction in the cost of electricity.

“The purpose of the loan is to provide financing in support of the program whose actions include electricity sector and PPP reforms to strengthen the cornerstone utility (KPLC),” Treasury says in the documents.

The company’s management said that the 15 percent cut on power tariffs that was effected in January will see it lose up to Sh26 billion in revenues. The estimate does not include a further 15 percent cut set to be effected before the end of June.

“The 15 percent power reduction if you look at our last year’s financials, the top line was Sh144 billion, then do 15 percent of this you will end up at Sh25 or Sh26 billion. A 15 percent tariff reduction on the end-user will be in that region,” Kenya Power said in March.

Kenya Power’s turnaround continued when its net income increased 27.6 times to Sh3.8 billion in the six months ended December from Sh138 million a year earlier. The effect of the 15 percent cut will be reflected in the full-year performance.

The company needs cash to upgrade its systems and reduce endless blackouts attributed to its ageing infrastructure and also meet increasing customer numbers. Kenya Power added 317,296 customers in the six months to December, pushing its client base to 8.59 million from 8.27 million in June last year.

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Kenya Power was last year forced to write off Sh15 billion in bad debts from unpaid electricity bills, most of which have been outstanding for more than three months.

The State-owned power distributor has been losing billions of shillings in uncollected revenues since the company dispenses electricity before collecting.

Households or domestic power users top the list of defaulters with about 60 percent of the outstanding bills among domestic customers, 20 percent SMEs and 10 percent commercial.

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