State explores new terms for Sh65bn Kenya Power debt


Kenya Power chief executive Bernard Ngugi. FILE PHOTO | NMG

The State is reviewing Sh65.96 billion Kenya Power #ticker:KPLC commercial debt to retire expensive ones through international partners to lift the utility firm from liquidity crunch.

Kenya Power latest disclosures show that government sees this as a way of saving the company from high loan servicing costs that have contributed to the dimmed fortunes of the electricity distribution monopoly.

“The government of Kenya is reviewing Kenya Power’s existing commercial facilities with objective to retire expensive ones through engagement on favourable terms with international partners,” said the firm.

About 77.3 per cent or Sh51.02 billion of the commercial loans are dollar-denominated, making the level of repayment costs susceptible to currency fluctuations.

The firm’s main commercial lenders include Standard Chartered Bank, Rand Merchant Bank, Equity, Stanbic Bank and Agence Franchaise Development.

Its total debts as at end of last June stood at Sh118.73 billion, made up of Sh65.96 billion commercial debt and Sh53.26 billion on-lent debt.

The on-lent debts, tapped from institutions like International Development Agency (IDA), China Exim Bank and Japan Development Bank, are guaranteed by the State and therefore payable to the government.

Kenya Power successfully petitioned the government to grant moratorium for payment of principal and interest on State on-lend loans amounting to Sh5.7 billion until July 2021.

“This will enable the company to meet its operational obligations until the situation returns to normalcy,” said Kenya Power.

The firm has been struggling with honouring debt repayments—especially those with one-year maturity— and has opened talks with lenders to convert short-term commercial facilities into medium-term debts.

Its short-term liabilities had outstripped short-term assets by Sh74.5 billion, putting it in a difficult position to honour obligations such as 40-day window for paying electricity suppliers.

It plunged into a Sh939 million net loss in the year to June 2020, its first loss in 18 years.