Kenya Power Set to Boost Its Liquidity from World Bank’s Ksh. 80b Loan

Kenya Power is set to boost its finances and the Last Mile Connectivity initiative as it benefits from part of the World Bank’s $750 million (80 billion shillings) funding to Kenya.

The loan is offered to complement Kenya’s budget and help the country recover from the Covid-19 economic hardships.

Part of the finances, as provisioned by the World Bank, is aimed at improving Kenya Power’s financial position. As such, the Treasury will pump 5 billion shillings into helping the company settle part of its outstanding debt for the last mile connectivity.

“The National Treasury also provisioned for Sh5 billion in the financial year 2022 budget for partial clearance of outstanding Kenya Power receivables against the last mile electrification program”, the World Bank said.

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Last Mile Connectivity is part of the government’s projects aimed at promoting a 24-hour economy by ensuring everyone has access to electricity. It is an eight-and-a-half-year project set to cost 77.6 billion shillings and is set to boost security and converge public facilities to the national grid.

On top of the World Bank financing, development financiers are also committing 50 billion shillings while the remainder is provided by the government.

Budget cuts and shortage of poles have greatly hampered Kenya Power’s achievement of the initiative and for the past three years, the country has missed its target of completing the project.

“Inadequate budget transfer to fund the last mile electrification program coupled with a slow growth in electricity consumption despite the aggressive connection campaign has caused liquidity constraints for KPLC forcing it to resort to high-cost, short-term debt to finance long-term assets,” the World Bank said.

As of June 2020, Kenya had connected 1,522,858 customers to the national grid, missing its target by nearly 1.28 million.

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In the 2021/2022 Budget Policy Statement by the Treasury, CS Ukur Yatani stated that the government plans to connect 2.4 million households to subsidized power in the year starting July, edging closer to the ambitious goal of universal electricity access.

The additional households will bring a total of connected homes under Kenya Power’s Last Mile initiative to over 9.6 million.

“This will enable connection of an additional 2.4 million new households through the grid and off-grid solutions,” Mr. Yatani said.

According to the CS, the increased connections will be achieved through a mix of geothermal, coal, wind, solar and hydro sources that will more than double power generation to 6,700 megawatts from 2,819 megawatts.

Moreover, a further 3,003 public facilities that include schools, trading centers, health centers, water points, and administrative offices have also been marked for connection.

Apart from reviving the rollout of the Last Mile, the lender further wants Kenya Power’s power purchase agreements (PPA) reviewed to strengthen the utility’s financial position.

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World Bank stated that Kenya’s feed-in-tariff (FiT) should be set on an auction system that would guarantee maximum pricing benefits to consumers.

The World Bank funding will come as a relief to millions of consumers across the country who remained frustrated by huge electricity bills commensurate to the service.

Currently, users pay between 16 and 24 shillings per kilowatt-hour of electricity depending on their bands of consumption.