Weak shilling inflates KenGen debt by Sh3.2 billion
Kenya Electricity Generating Company PLC (KenGen) Acting Managing Director and CEO Abraham Serem during a KenGen media briefing. PHOTO | DIANA NGILA | NMG
The weakening of the shilling inflated KenGen’s foreign currency loans by Sh3.2 billion in the year ended June, with the foreign exchange volatility forming part of costs that the company and other power producers pass on to electricity consumers.
The unrealized loss on revaluation of borrowings in the review period reversed a gain of Sh701.2 million that the Nairobi Securities Exchange-listed firm reported a year earlier.
KenGen also disclosed in its latest annual report that it incurred an actual loss of Sh606.1 million when repaying part of its foreign currency-denominated loans in the review period.
This was down from the loss of Sh954.2 million incurred the year before. The company has borrowings in US dollars, Japanese Yen and Euros in addition to local currency debt.
The shilling has depreciated significantly to trade at 123.6 units to the dollar currently from 106.5 units in early May 2021.
The depreciation has inflated borrowings for companies with foreign currency debt, a move that has seen some firms like Centum Investment Company Plc opt for early redemption of the facilities.
KenGen is significantly exposed to Forex losses with 99.2 percent of the company’s borrowings in foreign currencies.
Of the firm’s Sh133 billion in foreign currency loans, Sh58 billion is denominated in Japanese Yen, Sh54 billion in dollars and Sh20.9 billion in Euros.
During the year to June 2022, KenGen made repayments of Sh7.6 billion on external debt while borrowing a further Sh1.7 billion in the year.
Included in KenGen’s foreign currency borrowings are facilities entered into by the government with development finance institutions (DFIs) which are later advanced to the company through subsidiary loan agreements.
The World Bank, Agence Francaise de Development (AFD) and the European Investment Bank are among KenGen’s external creditors.
The Forex losses for KenGen have been shouldered by electricity consumers who have had to contend with an increased Foreign Exchange Rate Fluctuation Adjustment (FERFA) levy which includes the sum of foreign currency costs incurred by the electricity generator.
“Exposure to foreign currency risk is mitigated by the terms of Power Purchase Agreement that allow the company to recover certain foreign exchange losses/gains from Kenya Power,” KenGen states in notes attached to its financial statements for the year ended June last year.
“Loan payments are made by using the prevailing exchange rate as there are no forward currency contracts to eliminate the currency exposures.”
