Kenya Power to refinance Sh6bn debt as dollar shortage bites

Kenya Power's Finance general manager, Stephen Vikiru told journalists that this is part of the firm's short-term strategy to cope with the current global dollar shortage.

The listed power distributor requires at least $50 million every month to pay Independent Power Producers (IPPs) and at least $30 million quarterly to pay off external debt. 

"Kenya Power is the second leading consumer of US dollars in the country after oil marketers. Our current loan book estimated at Sh102 billion is 85 per cent foreign-denominated. We cannot access enough dollars in the market,'' Vikiru said. 

He, however, failed to give more details about the commercial debts to be refinanced due to legal matters as the deal is yet to be concluded.

Vikiru revealed that the strengthening of the dollar has pushed up Kenya Power's debt obligation by at least 10 per cent. 

The US dollar shortage has seen the shilling weaken to its lowest level, hitting a near 130 on Monday.

The tough regulation of forex interbank trade by the Central Bank of Kenya has fuelled a parallel FX market where a greenback is selling at up to Sh148. 

Apart from debt refinancing, Kenya Power is working on an arrangement that will see customers pay in dollars. 

"We have clients who are willing to pay in dollars. This will form part of our short-term strategy to quell volatilities in the global financial market. This is purely voluntary,'' Vikiru said. 

The power firm has also lined up long-term solutions to the dollar crisis, including a plan to have future Power Purchase Agreements (PPAs) denominated in shillings.

In 2017, The Energy Regulatory Commission (ERC) now Energy and Petroleum Regulatory Authority (EPRA) commissioned a study to help address existing constraints in the supply of local financing to infrastructure projects in the energy sector. 

The three months study was funded by the technical assistance facility of the Private Infrastructure Development Group (PIDG) was aimed at making electricity cheaper for the end user.

The cost of power has been going up in the last ten years despite increased generation capacity.

This could see Kenya walk in the footsteps of India and South Africa, which have successfully adopted their local currency-denominated bulk tariffs for energy projects. 

The firm is already engaging some power producers to accept payments in shillings. 

Kenya Power is also banking on the recently announced government-to-government deal to import petroleum products, as it will cut high dollar demand.

According to Vikiru, the deal will ease dollar demand by oil marketers, hence a steady supply in the market. 

Kenya will from this month start importing diesel, super petrol and jet fuel on credit in a deal the government says is meant to ease demand for the dollar and prop up the battered shilling.

The deal with the United Arab Emirates and Saudi Arabia has elicited mixed reactions, with OMCs challenging it in court.