Task force pushing for a new Kenya Power debt relief plan
Saturday October 30 2021
A Kenya Power technician removes illegal electricity connections at Milimani Estate in Nakuru town on March 30, 2021, during an operation to enhance revenue collection and efficiency in distribution. PHOTO | FILE
The presidential task force appointed to review operations of the loss-making Kenya Power wants the repayment of Ksh53.27 billion ($480 million) loans held by the struggling state agency delayed for two years to ease pressure on its finances.
The debts, tapped from the International Development Agency, China Exim Bank, and Japan Development Bank, are guaranteed by the state and are therefore payable by the government.
“We recommend a National Treasury moratorium for on-lent loans to Kenya Power 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 Ksh109.96 billion ($990 million) debt as at end of June last year, pointing to reliance on debt to run operations.
It has struggled to honour 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 Ksh14 billion ($126 million), followed by a Ksh13 billion ($117 million) 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 government to grant a moratorium for payment of principal and interest on government on-lent loans worth Ksh5.7 billion ($51 million) until July 2021.
Kenya Power said a moratorium would enable it to meet operational obligations until the situation returns to normal.
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 its fortunes around.
The firm has been in the spotlight amid financial haemorrhage largely linked to procurement scandals.
A preliminary audit report shows that Kenya Power held about Ksh9.8 billion ($88m) in deadstock, including items such as cables, meters and transformers.
The task force recommended a forensic audit of 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 the company’s supply and demand needs, and pricing policies.
Its membership draws from, among others, the Directorate of Criminal Investigations, the Central Bank’s Financial Reporting Centre, and the Assets Recovery Agency.
Editor's note: Story updated to correct currency figures. $1 = Ksh111