The amount of cash owed by Kenya Power and Lighting Company(KPLC) to US energy firm Ormat Technology for electricity supplies has hit Sh4.31 billion with the geothermal firm warning of financial exposure due to the deteriorating pace of payments by the State-owned utility.
Latest regulatory filings by the Naivasha-based geothermal power producer showed that KPLC owed it $62.8million(Sh8.81billion) by December 31, 2023, but only paid $32.2million(Sh4.5billion) in January and February 2024—leaving a balance of Sh4.31billion.
The outstanding debt is a drastic jump from December 2023 when KPLC owed the US firm Sh1.6billion.
“In the electricity segment, we are exposed to the credit and financial condition of KPLC which buys the power generated from our Olkaria III complex in Kenya. In 2023, KPLC accounted for 13.2 percent of our total revenues” Ormat said.
“There has been a deterioration in the collection from KPLC that became slower than in the past, and as of December 31, 2023, the amount overdue from KPLC in Kenya was $62.8 million(Sh8.81billion) of which $32.2 million(Sh4.31billion) was paid in January and February of 2024,” it said.
The US firm operates within the Naivasha-based Olkaria III complex through its wholly-owned subsidiary, OrPower 4, Inc., where it has an output capacity of 150 megawatts(MW)of geothermal power.
The company sells the electricity produced by its power plants in Olkaria to KPLC under a 20-year power purchase agreement(PPA) that ends between 2033 and 2036.
Ormat said its revenues from power sales in Kenya totalled Sh15.29 billion ($109.21 million) in 2023, a slight rise from Sh14.81 billion ($105.83 million) the previous year.
Kenya Power reported a net loss of Sh3.19 billion for the full year ended June 2023 following a sharp rise in financing costs on its hard currency obligations due to the weakening of the shilling in the forex market.
The performance of the Nairobi Securities Exchange-listed utility however rebounded in the six months ended December 2023 to post a Sh319 million net profit on increased electricity sales and an upward review of tariff, lifting it from the loss position.
The utility firm's unaudited results released on February 23, 2024, showed it had emerged from the Sh1.15 billion net loss it posted in the preceding similar period. Kenya Power’s revenue from electricity sales for the half year to December 31, 2023, increased by 31.3 percent from Sh86.67 billion to Sh113.55 billion, coming in the period Kenya Power said it connected 225,000 new customers to the grid surpassing its target by 13.87 percent.
Ormat said it expects to impact its earnings as KPLC negotiated lower rates under the existing PPA.
“KPLC recently requested more favourable rates on existing PPAs with it. Any change in KPLC’s financial condition or the terms of our agreement with KPLC may adversely affect us” it said.
Retired President Uhuru Kenyatta in 2021 appointed a task force that recommended reviews of PPAs between KPLC and power producers to help lower electricity costs.
“The Company has been approached by certain of these task forces and has participated in requested discussions with them, which remain ongoing,” Ormat said in its disclosure without providing details.
