Kenya Power seeks way out of short-term loans

State-owned electricity distributor Kenya Power #ticker:KPLC is seeking to secure fresh short-term loans to refinance its existing short-term debts on a longer tenor to ease strain on its coffers.

The power distributor has been left in a financial tight spot after it breached the terms attached to Sh59.6 billion worth of its loans.

“At the moment we are looking at short-term debt and then refinancing it to long tenor. We are still engaging our syndicated lenders so that we can see how we can be able to engage before we go to some of those other options,” said Kenya Power acting chief executive Jared Othieno in interview.

The short term loans in question are owed to Standard Chartered Bank #ticker:SCBK (Sh50.4 billion), Rand Merchant Bank (Sh7 billion), Stanbic Bank (Sh1.1 billion) and Agence Francaise de Development (Sh1.1 billion).

The lender however got temporary relief after obtaining extension agreements for the loan breaches until June next year.

Analysts said refinancing Kenya Power’s short-term debt with new long-term loans makes sense despite being costly.

“(Kenya Power’s options include) either to re-issue debt or the government steps in to provide soft financing,” said risk management expert Deepak Dave of Riverside Capital, a Nairobi based debt advisory firm.

Mr Dave, while describing Kenya Power as a highly stressed company, said the firm is in urgent need of “a restructured debt package that flattens payments out or allows a break in payments for example deferred repayments by 12 months.

“This might give it breathing room,” he said in an interview.