Kenya Power’s debt due for repayment within one year has hit Sh20.95 billion, exposing the utility to fresh cash flow challenges amid the continued depreciation of the Kenya shilling, which ballooned its finance costs by 89.2 percent.
The company’s outstanding debt grew by 10.2 per cent to Sh115.4 billion the financial year to June 2023, but what will worry the power distributor is that 18.1 per cent of this debt is due by June next year.
Kenya Power plunged into a Sh3.2 billion net loss during the period, with its performance taking a heavy hit from the shilling slump, which increased its debt service costs to Sh24.15 billion up from Sh12.76 billion.
Between June 2022 and June 2023, the Kenyan unit depreciated by 19 per cent, which also saw the utility’s power purchase costs skyrocket given that the contracts were denominated in US dollars.
Over half of the finance costs incurred by the company (Sh16.86 billion) were due to the shilling fall, which is nearly three times the actual interest on the loans which was Sh5.86 billion.
“The impact of the currency fluctuation as reflected in the finance costs and cost of power purchase resulted in a net loss of Sh3.2 billion,” said Kenya Power Board Chairman Joy Brenda Masinde.
To underline the impact of Kenya Power’s growing debt burden, the Sh20.95 billion debt repayment is equivalent to 17.43 per cent of the Sh120.1 billion revenues that the utility earned from selling power in the period to June 2023.
Kenya Power is looking to offset its on-lent loans, which are dollar-denominated, by transferring some of its assets to the fully State-owned Kenya Electricity Transmission Company (Ketraco).
In an interview with the Nation last month, Kenya Power Managing Director, Dr Joseph Siror, said the utility will transfer transmission lines, substations, and land that these assets are occupying to Ketraco to enable it to offset the dollar loans.
According to its latest financial results, the utility’s on-lent loans amounted to Sh79.48 billion by June 2023 up from Sh63.67 billion last year, but will balloon further if depreciation of the shilling goes on unabated.
“There is an on-lent facility which is in the books of Kenya Power. By transferring these assets to Ketraco, that particular loan is going to be offset by the value of the assets so that going forward, it will not be the responsibility of Kenya Power to pay those loans, the government is now going to take over the loans,” said Dr Siror.
Kenyans incur a pass-through cost in their power bills to cater for the forex fluctuation, but Kenya Power has been pushing to further cushion itself from the shilling depreciation by charging some of its customers, especially large commercial industries, in US dollars.
The company has also been lobbying for all new power purchase agreements (PPAs) signed between itself and independent power producers (IPPs) to be denominated in Kenyan shillings to stabilise its power purchase costs.
“Currency risk arises primarily from purchasing imported goods and services directly from overseas or indirectly via local suppliers and foreign borrowings,” said the utility.
