Kenya Power has obtained a one-year extension for the repayment of Ksh25.12 billion ($196.25 million) owed to the government in an effort to provide the energy distributor more breathing room to restructure its commercial debt and improve its cash flow position.
This comes as the utility announced a Ksh37.65 billion ($294.14 million) expenditure on pricey power for the 12 months ending June 30, 2022, amidst stalled negotiations on whether to terminate long-term power purchase agreements (PPAs) with independent power producers (IPPs).
Kenya Power, which is owned by the state to the tune of 50.08 per cent, states in its annual report (2022) that it has acquired an extension of the National Treasury-approved moratorium on on-lent debt repayment until June 30, 2024. The date of repayment was 30 June 2023.
Another Ksh5.7 billion ($44.53 million) debt moratorium granted by the National Treasury in 2020 expired in June 2022, and full payments (principal and interest) were anticipated to commence in July 2022.
As of June 30, 2022, the corporation remained in a negative position of Ksh55.74 billion ($435.46 million).
Now, it seeks to capitalise on the government’s debt repayment moratorium and the combined effect of the other financial recovery initiatives in order to restructure its commercial debt and achieve sustainable annual debt service, an improved net cash position and working capital, and improved financial ratios.
In the 2021/22 fiscal year, net debt was Ksh95.91 billion ($749.29 million), compared to Ksh103.55 billion ($808.98 million) the previous year.
“The improved availability of cash from the extended debt tenors and lower finance cost obligations as a result of negotiating lower interest rates on existing debt facilities will be utilised to expedite the settlement of outstanding trade payables,” the company adds.
The company is publicly traded on the Nairobi Stock exchange. It reported a net loss of Ksh1.14 billion ($8.9 million) for the six months ending on December 31, 2022, compared to a net profit of Ksh3.81 billion ($29.76 million) for the same period in 2021. The company attributed the loss to increased forex losses and the implementation of a 15 per cent reduction in the end-user tariff beginning in January 2022.
For the 12-month period ending June 30, 2022, the company’s earnings before taxes decreased by 37 per cent, from Ksh8.19 billion ($63.98 million) to Ksh5.12 billion ($40 million).
The overall amount of purchased energy KPLC obtained 7,911GWh, or 63 per cent of the total electricity purchased, from KenGen and 4,742GWh from IPPs, according to the report.
The cost of KenGen’s electricity was Ksh38.9 billion ($303.9 million) or 41 per cent less than that of IPPs, which totalled Ksh56.27 billion ($436.6 million) or 59 per cent more. Kenya Power paid an average of Ksh3.93 ($0.03) per kWh to KenGen versus Ksh11.87 ($0.09) per kWh to IPPs.
Auditor-General Nancy Gathungu stated, “The Corporation signed expensive contracts with IPPs and in some instances sold power below the cost price.”
In December 2021, the Senate’s Standing Committee on Energy decided to probe the company for its excessive payments to IPPs, which have been largely attributed to Kenya’s growing electricity costs.