Electricity cost in Kenya could reduce gradually as Kenya Power benefits from part of the expected $750 million (Sh80 billion) funding to Kenya by the World Bank to improve its liquidity.
This will be a relief to millions of power consumers in the country who have often complained of huge power bills not commensurate to the service.
Most domestic customers are currently charged between Sh16 and Sh24 per kilowatt-hour (kWh), depending on their consumption bands.
A statement from the World Bank on Friday said the policy operation also prioritises energy sector reforms to improve electricity access and ensure that Kenyans benefit from least-cost, clean energy sources.
“Further, the new policy framework will help strengthen Kenya Power and Lighting Company’s (KPLC’s) finances with a new competitive pricing regime,” World Bank said.
The lender, however, did not indicate the actual amount to be channeled to the power distributor which has been in a loss position on high system losses.
Kenya Power’s half-year net profit dropped 80 per cent to Sh138 million in December 2020 from Sh692 million in 2019 on higher financing costs as a result of unrealised foreign exchange losses occasioned by the depreciation of the shilling against major foreign currencies.
It, however, posted a net loss of Sh939 million for the year ending June 2020 after getting an Sh6.1 billion tax credit lifting the company from a pre-tax loss of Sh7 billion.
Early this year, the Kenyan government said it will spend Sh36 billion to bail out key parastatal which have sunk into losses as a result of Covid-19 economic fallout.
According to the exchequer, state companies like Kenya Airways, Kenya Power, and several universities need urgent support after their revenues dropped sharply during the pandemic.
The World Bank’s funding is coming just two months after the power distributor also benefitted from the Sh255 billion loan kitty for the International Monetary Fund.
Kenya Power has been mulling plans to retire expensive contracts it has with independent power generators with the ultimate goal of lowering the price of electricity for homes and businesses.
The listed power distributor paid capacity charges worth Sh47.4 billion, representing more than half of the company’s cost of sales of Sh87.4 billion in the past financial year.
The high operational costs saw the government intervene, with President Uhuru Kenyatta ordering an immediate stop to the renewal of Power Purchase Agreements(PPAs). He has since appointed a team to review existing deals.
Approval of new deals is also on hold as the state moves to scrutinise running contracts which have attracted criticism for the high pricing by players involved in thermal power production.
The biggest independent beneficiaries include Tsavo Power, Iberafrica Power, Gulf Power, Thika Power, Triumph, Rabai Power and Aggreko, all of which are now being phased out.
Most of the IPPs use thermal, the most expensive form of power generation at upwards of Sh20 per kilowatt-hour compared to solar which is at a low of Sh3 per unit. Geothermal has a wholesale price of Sh8 per Kwh.
On Friday, World Bank approved $750 million loan for Kenya to support in post-Covid-19 recovery.
According to the international lender, the loan priced at 3.1 per cent will also support policy reforms that will strengthen transparency and accountability in public procurement and promote efficient public investment spending. BY THE STAR