Push for new Kenya Power debt relief planFriday October 29 2021
The presidential task force appointed to review operations of the loss-making Kenya Power wants the repayment of Sh53.27 billion loans held by the struggling State agency delayed for two years to ease pressure on its finances.
The debts, tapped from institutions like International Development Agency (IDA), China Exim Bank, and Japan Development Bank, are guaranteed by the State and are therefore payable to the government.
“We recommend a National Treasury moratorium for on-lent loans to KPLC be extended by a further period of two years,” the task force said.
Kenya Power disclosures show that on-lent loans accounted for 48.4 percent of its Sh109.96 billion debt as at end of June last year, pointing to the utility’s reliance on debt to run its operations.
The firm has been struggling with honouring debt repayments — especially those with one-year maturity — prompting the push for the moratorium and negotiations with lenders to convert short-term commercial facilities into medium-term debts.
China Exim Bank accounts for the biggest share of the on-lent loans at Sh14.019 billion, followed by a Sh13 billion facility from IDA that was meant to fund the construction of a line to import power from Ethiopia.
If the moratorium is approved, it will be the second time in less than two years that Kenya Power will have got relief on loan repayments in a bid to ease pressure on its cash-flow struggles.
In June last year, the State monopoly successfully petitioned the State to grant a moratorium for payment of principal and interest on government on-lent loans worth Sh5.7 billion until July 2021.
Kenya Power said that the moratorium would enable it to meet its operational obligations until the situation returns to normalcy.
The firm revealed that it had opened talks with lenders to convert short-term commercial facilities into medium-term debts as part of efforts to ease the debt burden.
The presidential task force reckons that moratoriums on the loans and review of expensive electricity purchase contracts between Kenya Power and independent power producers are key to helping turn around the State monopoly’s dwindling fortunes.
The utility firm has been in the spotlight amid financial haemorrhage largely linked to procurement scandals.
A preliminary audit report, for example, shows that Kenya Power held about Sh9.8 billion in deadstock, including items such as cables, meters, and transformers that have been sitting in the warehouses for more than five years.
The task force recommended a forensic audit of the power firm’s current procurement systems and stocks to weed out cartels that have over the years profiteered through fraudulent dealings with rogue employees.
An inter-ministerial committee is currently conducting a fresh audit on Kenya Power’s supply and demand needs, and pricing policies. Its membership draws from, among others, the Directorate of Criminal Investigations, the Central Bank of Kenya’s Financial Reporting Centre, and the Assets Recovery Agency.
Interior Cabinet Secretary Fred Matiang’i earlier this month said the electricity supplier had been declared a ‘Special Project’ and that the team would also oversight reforms at the utility firm.