Kenya Power managing director Ben Chumo. PHOTO | FILE
What you need to know:
Kenya Power has signed a seven-year Sh17 billion loan with Standard Chartered Plc, marking the first tranche of debt expected to flow to the firm by June next year.
The firm has also finalised a Sh9 billion loan agreement with the Exim Bank of China, and will on Friday meet World Bank representatives to negotiate another advance of an undisclosed amount.
Kenya Power plans to borrow Sh53 billion ($595 million) in the next seven months to improve its infrastructure, adding onto a growing portfolio of commercial bank loans in its books.
The electricity distributor on Wednesday signed a seven-year Sh17 billion loan with Standard Chartered Plc, marking the first tranche of debt expected to flow to the firm by June next year.
Kenya Power managing director Ben Chumo on Wednesday said he has also finalised a Sh9 billion loan agreement with the Exim Bank of China, and the electricity firm will on Friday meet World Bank representatives to negotiate another advance of an undisclosed amount.
The Standard Chartered loan, whose interest rate was not disclosed, is evidence of a growing preference by power firms – including KenGen – to borrow from commercial banks in addition to drawing funding from multilateral lenders.
“Last year, we were forced to borrow short-term loans from commercial banks because lenders like the World Bank took too long to decide what they would give us,” said Mr Chumo.
In the year to June 2013, Kenya Power’s total borrowings grew 72 per cent to Sh47.8 billion compared to the previous year.
This increase constituted Sh5.16 billion received from South Africa’s First Rand Bank, Sh4 billion from Equity Bank, Sh5.16 billion from Standard Chartered and another Sh2.5 billion from Citi Bank.
The power distributor says the funds went to urgent grid repairs and to capital-intensive investments that would increase its reach above the current 2.9 million customers.
“Our preference is cheaper long-term loans from multilateral lenders but at the time we urgently needed the money to improve our network,” Mr Chumo said during the loan-signing ceremony on Wednesday.
“The loan from Standard Chartered is at a very competitive interest rate, otherwise we would not have picked them.”
The Sh17 billion loan from Standard Charted includes Sh6.2 billion taken to refinance an outstanding debt with the lender. Kenya Power says it will begin to repay the loan 18 months from now.
KenGen, the main electricity supplier to Kenya Power, had until June 2013 maintained a credit portfolio that hugely comprised of multilateral lenders.
In the past financial year, however, KenGen has borrowed Sh642.5 million from the Commercial Bank of Africa as a short-term overdraft and another 14-year Sh8.8 billion loan to finance construction of geothermal wells.
The power generating firm also booked a Sh1.4 billion loan from Bank of Africa, NIC Bank Limited (Sh1.2 billion), Kenya Commercial Bank Limited (Sh1.5 billion) and Sh1.2 billion from Equity Bank. These new agreements pushed its total loans to Sh136.1 billion as of June.
Kenya Power says the Sh53 billion it is expecting will go towards enhancing its capacity as well as improving the quality and reliability of power supply to customers.
The firm is hoping to increase its customer count by a million by the end of the current financial year and construct at least 36 new substations across the country.
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