- The power utility is in talks with World Bank to restructure short term loans
- The firm's net profit for the year ended June 30 dropped 91.9%
Kenya Power is surviving on bank overdrafts, revealing the financial strain at the country’s sole electricity retailer.
Briefing the Senate Committee on Energy, Energy Cabinet Secretary Charles Keter said the firm needs urgent financial support saying continued operations on short-term loans is unsustainable.
“We are in talks with the National Treasury and other financiers to support the company and ease high debt obligation. Those short-term loans are expensive. They are not sustainable,’’ Keter told the Ephraim Maina led committee.
He said that the firm is in talks with the World Bank and African Development Bank to buyout the short-term debt of Sh102.6 billion in exchange for longer tenure ones.
The CS and Kenya Power management were pushed to illustrate the true nature of the company’s loans, with some Senators suggesting that the power utility firm should be put under military administration just like the Kenya Meat Commission.
"It is painful to learn that the sole power utility is operating on an overdraft, despite charging consumers heavily. This is unacceptable,’’ Narok County Senator Ledama Olekina said.
Laikipia Senator John Kinyua suggested that the firm should be placed under military for better administration.
Kenya Power managing director Benard Ngugi said most of the debt at the listed firm is commercial and dollar-denominated, with an annual interest of 6.5 per cent.
"We have a commercial debt of up to Sh65 billion, charged an average interest of 4.5 per cent and a LIBOR of two per cent. The rest is shilling denominated one from local banks charged at 12 per cent per annum,’’ Ngugi said.
Libor is the basic rate of interest used in lending between banks on the London interbank market and also used as a reference for setting the interest rate on other loans.
He however maintained that the company is financially stable and is running its daily operations without fail.
Senators said the interests charged are expensive and asked the management to look for a sustainable refinancing module.
Kenya Power's net profit for the year ended June dropped by a 91.9 per cent to Sh262 million from Sh3.3 billion the previous year.
This was attributed to increasing non-fuel power purchase costs which went up by Sh18.1 billion to Sh70.9 billion, from Sh52.8 billion in a similar period in 2018.
The costly purchases eroded gains made on revenues from electricity sales which grew by Sh16.9 billion to close at Sh112.4 billion, from Sh95.4 billion the previous year, a 17.8 per cent increase.
Increased finance costs as a result of continued usage of commercial facilities: especially the use of short-term facilities(bank overdraft) to finance the company’s operations was also listed as a reason for low performance.
The committee has called for a comprehensive forensic audit of Kenya Power's books of accounts.
Separately, the committee has asked the Energy and Petroleum Authority (EPRA) to reject Kenya Power's proposal to increase tariff charges, saying that the cost of power in the country is already high.
Maina opposed the proposal by Kenya Power, terming it exploitative.
EPRA director-general Pavel Oimeke confirmed receiving the proposal from the power distributor but indicated that the decision on power tariff review will be out after six months.
''The proposal will follow due process. From public engagement to the Parliament. We anticipate a final decision in the next six months,'' Oimeke said.