A committee of Parliament has questioned a Sh9.9 billion loan purportedly borrowed by the State on behalf of Kenya Power and Lighting Company (KPLC).
A report by the Debt and Privatisation Committee claimed that although the debt is marked as guaranteed to KPLC, the utility firm is not aware of its existence.
“With regard to the guaranteed for KPLC, information availed (sic) to the committee is that the KPLC is unaware of the existence of this loan raising questions on the purpose and application of the loan,” said the report tabled in Parliament.
The committee chaired by Balambala MP Abdi Omar Shurie said it has requested the Auditor-General’s office to audit the disputed debt.
“That the Office of the Auditor General expedites the audit of project loans under the water sector and the Sh9.9billion loan borrowed on behalf of KPLC and submits a report to the House within the next two months” a recommendation in the committee report reads.
Kenya Power holds a series of debt facilities including those by international development partners. A huge debt burden has however meant that the utility has over the years been unable to service the dues without the help of the government which guarantees some of the loans.
The company’s latest annual report shows that repayments on borrowings by the utility dropped to Sh15.1 billion in the financial year ended June 2022 from Sh21.3 billion a year earlier even as repayment of the previous year’s accrued interest jumped to Sh5.9 billion from Sh4.2 billion.
On-lent borrowings by Kenya Power—to borrow money and lend it to someone—rose to Sh64.1 billion in 2022 from Sh57.9 billion, including Sh7.6 billion in accrued interest. The on-lent loans relate to projects including the Kenya Electricity Expansion Project and Transformer Densification. The annual report showed that the utility had 11 outstanding on-lent borrowings, which are largely denominated in Euros.
Total debt by Kenya Power stood at Sh103.8 billion by the close of the June 2022 financial year, marking a slight drop from Sh105.97 billion the previous year. The report further showed that the utility firm’s commercial borrowings stood at Sh39.7 billion at the end of June last year from Sh48 billion a year earlier, including facilities from Standard Chartered, Equity Bank, NCBA, and South Africa’s Rand Merchant Bank.
Negotiating repayment terms
Kenya Power disclosed in March it was negotiating repayment terms of two dollar-denominated loans estimated at Sh6 billion to ease debt servicing pressure amid a steep weakening of the shilling against the dollar and other major currencies.
The utility firm is set for an impending Sh40.84 billion ($ 300 million) World Bank loan to help boost its operations and improve the supply of electricity at the grassroots through the Last Mile Connectivity programme.
The debt through the International Development Association (IDA), which is a member of the World Bank Group, will support Kenya’s goals of achieving universal access to electricity and clean energy by 2030 through a multi-phase programmatic approach (MPA) that allows flexibility in the application of a variety of financing instruments.
The lender said phase one of the MPA will focus on improving the financial viability of KPLC to sustainably underpin a return to faster connections rollout and cut system losses. The second phase of the programme is focused on increasing cheaper and cleaner imports from Ethiopia while the third phase targets increasing private sector participation in renewable energy through a solar auction and investing in shared infrastructure (solar parks) in addition to supporting transmission and distribution investments.
The fourth phase of the programme will continue with priority transmission and distribution investments to help achieve the goal of universal access to electricity.
