Kenya Power paid electricity producer Ormat Technologies $12.4 million (Sh1.61 billion) in April, cutting its defaulted debts to the US firm by nearly a third after a biting dollar shortage forced the utility to default on wholesale payments.
Kenya Power had been owing the company $40 million (Sh5.22 billion) in unpaid power purchases by March, amid dollar availability challenges at the power distributor.
“The company has historically been able to collect on substantially all of its receivable balances. As of March 31, 2024, the amount overdue from KPLC in Kenya was $40 million, of which $12.4 million was paid in April 2024,” said Ormat in its latest regulatory filings.
Kenya Power revealed in February that the foreign exchange issues even saw some independent power producers (IPPs) accept to be paid in Kenya shillings because the firm could not find dollars to settle mounting arrears.
“These are contractual relationships with IPPs, and due to the liquidity challenges we had with forex it is an offer we made to them to pay them in Kenya shillings, and some of them accepted,” said finance manager Stephen Vikiru.
The US firm has, however, revealed Kenya Power settled 31 percent of the debt in April, giving its finances a boost to its finances during the quarter. The company also expressed confidence that it would collect all past due amounts from the utility.
“This belief is supported by the fact that, in addition to KPLC’s obligations under its power purchase agreement, the company holds a support letter from the Government of Kenya that covers certain cases of KPLC non-payment (such as non-payments that are caused by government actions and/or political events),” said the power producer.
Ormat’s local subsidiary, OrPower 4, is the third-largest power producer, behind the State-owned Kenya Electricity Generating Company and Lake Turkana Wind Power, and generates geothermal electricity.
OrPower 4 owns four geothermal power plants at Olkaria in Naivasha with a total capacity of 150 megawatts, making it Kenya’s second-largest geothermal power producer.
The company sells electricity to Kenya Power under a 20-year power purchase agreement that ends between 2033 and 2036.
Ormat’s earnings from Kenya Power contribute to 12.2 percent of the company’s revenues.
Kenya Power’s payment of part of the debt signals improved availability of dollars in the market. The utility had struggled to find enough dollars last year to make its foreign-currency-denominated debts.
The strengthening of the Kenya shilling against the US dollar since February has handed a major boost to the utility and other large forex buyers, enabling them to purchase the greenback at cheaper rates.
