Kenya Power to pay rural electricity agency’s Sh19.4bn debt by December

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Kenya Power Offices along Aga Khan Walk as pictured on April 23, 2023. PHOTO | LUCY WANJIRU | NMG

Kenya Power will pay Sh19.4 billion debt it owes the Rural Electrification and Renewable Energy Corporation (Rerec) before the end of the year.

The debt is the outstanding revenue the utility has been collecting through the rural electrification programme (REP) levy on behalf of Rerec but has not been fully remitted.

The levy is charged at five percent of the power consumed and funds rural electrification.

The International Monetary Fund (IMF) has revealed that Kenya Power will settle this debt by December.

The settlement of the debt is part of the action plan that was approved by the Cabinet in May to restore the utility’s medium-term profitability and cover its liquidity gaps.

“In line with the action plan, KPLC will by end-December 2024, settle the outstanding Rural Electrification Schemes (RES) operations and maintenance cost deficit of Sh19.4 billion (assessed as of June 2022),” said the IMF.

The lender further said that Kenya Power and Rerec will enter into a commercial contract for the maintenance costs for future RES schemes.

Kenya Power operates and maintains Rerec’s network in addition to implementing projects for the company.

Settling the Rerec debt is, however, a fresh headache for the utility that is sagging under the weight of growing commercial debts. Its outstanding debt grew by 10.2 percent to Sh115.4 billion in the financial year to June 2023.

Most of this debt is denominated in foreign currency, which means the company is taking a huge hit from the rapid depreciation of the Kenyan shilling.

The impact of a weak shilling was clear in the financial year 2022/23 during which Kenya Power plunged into a net loss of Sh3.2 billion.

The loss came after the company took a major forex hit, raising its debt service costs to Sh24.15 billion up from Sh12.76 billion in the previous year.

Kenya Power is looking to offset its on-lent loans, which are dollar denominated, by transferring some of its assets to the State-owned Kenya Electricity Transmission Company.

For Rerec, the settlement of the debt will be a shot in the arm even as it struggles with its own financial problems challenges. The company connects thousands of customers in rural areas to the grid annually.

Rerec has lobbied to bill customers on its own instead of the revenue being funnelled through Kenya Power.

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