Kenya Power is seeking the government's help to convert a portion of its dollar-denominated debt to the Kenya shillings in a bid to soften the hit from the depreciating local currency.
Managing Director Joseph Siror said up to 30 percent of its foreign currency loan book is up for redenomination if the efforts yield the desired outcome.
“We are engaging the National Treasury, especially on the fact that there are some old debts...on the Kenya shilling end we have liquidity, it’s only on the foreign exchange debt that we have a challenge.
So, we are engaging them to convert them to Kenya shilling so that so that we can offset it in the local currency,” he told the Business Daily.
The shilling has lost 18 percent of its value against the greenback since the start of the year, closing on August 23 at 144.5 against the US dollar.
According to the company’s latest annual report, total borrowing stood at Sh103.8 billion in the year ended June 2022 of which Sh76.2 billion was US dollar-denominated, accounting for the lion’s share.
The remaining debt was split between the Kenya shilling and the euro at Sh17.5 billion and Sh10.1 billion, respectively.
In the half year ended December 2022, Kenya Power slumped back into the red after Sh7.4 billion worth of debt service obligations wiped out the company’s Sh5.7 billion operating profit, pushing the firm into a Sh1.1 billion loss.
Additionally, the power distributor says it is aggressively engaging independent power producers (IPPs) to consider the redenomination of some contracts from mandatory payment in the US dollar to Kenya shilling.
Kenya Power could not disclose how many IPPs have inked the deal for the redenomination of contracts owing to the fact that it is in the closed period with full-year earnings release expected soon.
In the half year ended December 2022, the utility’s operating costs increased from Sh19.0 billion to Sh21.7 billion owing to increased foreign exchange losses arising from revaluation of outstanding payments to power generators denominated in foreign currencies as a result of the depreciation of the shilling.
“In the same space, one of the things we have been doing is to engage independent power producers and see whether they can accept payment in the Kenya shilling and there are some good ones who have actually allowed us to do so and we have managed to offset in the shilling using the prevailing exchange rate and we have managed to pay quite a bit,” says Dr Siror.
