Kenya Power has paid out $61 million (Sh7.9 billion) it owed a US energy firm Ormat Technology for electricity supplies over the last eight months, signalling improved liquidity for the majority-owned State firm.
Kenya Power owed the Naivasha-based geothermal power producer $62.8 million (Sh8.17 billion) by December 2023 for electricity supply.
This means that Kenya Power has paid 97.1 percent of the original debt that was outstanding to the power producer at the close of last year.
OrPower 4 is a subsidiary of US firm Ormat Technologies, which is listed on the Nasdaq.
Ormat however says that Kenya Power still owes $20.5 million (Sh2.6 billion), which indicates new power purchase costs that have fallen into arrears this year.
The firm revealed that Kenya Power has been settling the debt in tranches this year, easing its exposure from the debt that had accumulated last year.
The first tranches totaling $32.2 million (Sh4.1billion) were paid by the utility in January and February.
A further $12.4 million (Sh1.6 billion) was wired to the firm in April.
The latest tranches of $16.4 million (Sh2.1 billion) were paid in July and August.
“As of June 30, 2024, the amount overdue from KPLC in Kenya was $36.9 million of which $16.4 million was paid in July and August 2024,” said Ormat.
OrPower 4, is the third largest power producer in Kenya, only behind the State-owned KenGen and Lake Turkana Wind Power. The company has four geothermal power plants at Olkaria in Naivasha with a total capacity of 150 megawatts.
This makes it Kenya’s second-largest geothermal power producer.
Kenya Power is one of the largest buyers of foreign currency in Kenya. The utility uses the forex to pay for power purchase obligations to Independent Power Producers (IPPs).
But this also means the company is uniquely vulnerable to shocks in the forex market, particularly the depreciation of the Kenyan shilling.
While Kenya Power passes on power purchase-related forex costs to consumers, it shoulders the forex losses on its huge pile of external debt.
With a biting forex shortage hitting the country last year, the utility defaulted on paying billions of shillings to IPPs.
The strengthening of the local currency – the Kenyan shilling has gained value against the US dollar by as much as 22 percent in the last seven months – has afforded the utility a window to settle the debts.
The currency depreciation last year ballooned Kenya Power’s finance costs in the year to June 2023 to Sh24.15 billion.
This was a sharp increase from Sh12.7 billion in the previous year.
The higher finance costs plunged the company into a net loss of Sh3.19 billion, reversing a profit after tax of Sh3.26 billion in the previous year.
