Economy

Treasury eyes taxpayers cash to pay Sh104bn parastatal loans

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National Treasury building. FILE PHOTO | NMG

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Summary

  • Kenya Power accounts for more than half of the non-guaranteed debt, which the Treasury could potentially have to step in and repay.
  • The Treasury could also come to the aid of Kenya Pipeline Company, which has a Sh19 billion syndicated loan from Stanbic Bank, NCBA, StanChart, Co-operative Bank, and South Africa’s Rand Merchant Bank.
  • Kenya Airports Authority debt stood at Sh11.82 billion as of June 2020, comprising two facilities from France Development Bank — Sh6.77 billion.

Taxpayers may in future potentially step in and bail out nine State-owned firms, including Kenya Power, from commercial loans amounting to more than Sh104.84 billion, the Treasury has disclosed.

The loans, which the firms took out after seeking approval from the Treasury, pose potential financial burden on the taxpayer as the proceeds were invested in priority projects.

The credit was advanced by commercial lenders based on the “sound financial position” of the State corporations, which may struggle to honor repayments in future.

“Such SOEs (state-owned enterprises) borrow to finance strategic and high priority projects in the national development agenda,” the Treasury says in the annual debt report.

“The non-guaranteed loans, therefore, pose a contingent liability risk and potential fiscal commitment to the national government.”

Kenya Power accounts for more than half of the non-guaranteed debt, which the Treasury could potentially have to step in and repay. The near-monopoly electricity distributor had Sh53.84 billion in debts as of June 2020, the bulk of which are from Standard Chartered Bank in three facilities. The loans from StanChart are Sh27.72 billion (World Bank-guaranteed) to be repaid in five to 10 years for refinancing Kenya Power’s costly loans, Sh7.59 billion with a maturity of four years for refinancing, and Sh800 million with a similar tenure to beef up working capital.

The loss-making power utility also owes NCBA Sh6.75 billion, which will mature in more than 10 years, Equity Bank (Sh4.06 billion which matures in less than four years), and Rand Merchant Bank of South Africa (Sh1.26 billion which will be due in less than four years).

The Treasury could also come to the aid of Kenya Pipeline Company, which has a Sh19 billion syndicated loan from Stanbic Bank, NCBA, StanChart, Co-operative Bank, and South Africa’s Rand Merchant Bank for construction of a pipeline that matures in less than four years.

Other firms which may expose taxpayers to financial commitments include KenGen, which has a loan of Sh13.62 billion composed from credit from NCBA (Sh8.36 billion for wellheads), Co-op Bank (Sh2.33 billion for drilling of 89 wells), HBSC of London(Sh1.44 billion for purchase of rigs) and France Development Bank (Sh801 million).

Kenya Airports Authority debt stood at Sh11.82 billion as of June 2020, comprising two facilities from France Development Bank — Sh6.77 billion for the upgrade of airport facilities with a tenure of fewer than 10 years and Sh5.05 billion which matures in more than 10 years.

Jomo Kenyatta University of Agriculture and Technology could potentially expose taxpayers to Sh2.74 billion debt in three facilities from KCB for infrastructure development, while Kenyatta University’s debt was about Sh1.26 billion from Equity (Sh700 million) and Co-op Bank (Sh564 million).

The University of Nairobi had a loan of Sh783 million from Absa Bank. Others are East African Portland Cement (Sh1.75 billion from KCB) and Postal Corporation of Kenya (Sh20 million from NCBA).

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