Kenya Power has paid Sh36.88 billion as part of the debt it owes power generators.
Kenya Power was unable to meet its financial obligations due to dollar shortage in the market.
The bulk repayments, which have been made in US dollars, Euros, British pounds and Indian rupees, have been attributed to easing of the country’s foreign currency crunch.
An industry document seen by this publication shows the utility firm made payments of $66.1 million (Sh10.45 billion) in October and $74.34 million (Sh11.76 billion) in November towards settling the outstanding dues.
The company also paid €8.85 million (Sh1.53 billion) and €69.63 million (Sh12.06 billion) in the two months respectively, as well as £297 (Sh59,806) and 569,866 Indian Rupees (Sh1.08 million).
“In the previous periods, going back to March 2023, KPLC has been struggling to get hard currency due to tight liquidity in the forex market. The company was packing payment obligations for USD/EURO denominated obligations, until the liquidity market improved,” said the disclosure.
It added: “Thus when market eased in December 2023, KPLC started making pending USD/EURO financial obligations.”
The power purchase agreements (PPAs) signed between Kenya Power and power producers are denominated in foreign currency which cushions the generators from local currency fluctuations. Kenya faced a major shortage of forex especially at the beginning of last year due to huge import bills, largely caused by high global oil prices. This made it challenging for large users of forex such as Kenya Power to source dollars to make payments.
The shortage of dollars in the market prompted the Kenya government to go for government-to-government oil deal where Kenya purchases oil on a credit period of six months to ease forex shortage.
The forex shortage has since eased, which has enabled the utility to settle part of the arrears that had accumulated for months.
During the period under review, KenGen also settled part of its debts, among them the repayment of 253.35 million Japanese Yen (Sh276.08 million), €5.39 million (Sh934.63 million), £3,435 (Sh691,501) and $2.27 million (Sh359.75 million).
The forex implication of the payments has been huge on power bills for December 2023 and January 2024, thanks to the foreign exchange rate fluctuation adjustment (Ferfa) charge.
“KenGen made Euros 5.4 million and Japanese Yen 253.3 million in loan repayments in December, which were used to calculate the Ferfa rates applicable in January 2024,” said the disclosure.
As a result, power prices have increased by as much as 16.6 percent for some customer categories following the latest review of electricity prices this week.
However, it is expected that electricity prices will stabilise in the next review, considering that the large bulk of the outstanding forex repayments have been settled.
