04 April 2015, Nairobi – Kenya Power’s plan to expand and upgrade electricity supply network on Tuesday received a Sh42.3 billion ($457.5 million) boost from the World Bank.The facility comprises Sh23.12 billion ($250 million) in loan, Sh18.49 billion ($200 million) in guarantee and a further Sh693.45 million in grant from the Strategic Climate Fund-Scaling up Renewable Energy Programme, the global development lender said in a statement yesterday.
The Sh18.49 billion guarantee will help Kenya Power negotiate for lower interest and longer tenures as it seeks new debt facilities amounting to Sh46.23 billion ($500 million).
The restructuring will help the near-monopoly electricity distributor reduce its finance costs that spiked 60.4 per cent to Sh4.01 billion in the 2013-2014 by replacing the “existing debt that is placing a heavy burden on the company”, the bank said.
The company sought the World Bank’s expertise to help develop a long term borrowing policy, managing director Ben Chumo said on October 22.
“The focus is to take up more and more of long term debts which take longer to procure, but are cheaper,” Chumo said. “Short term loans are very costly and most of it would be eliminated this year(ending June 2015).”
The new funding under the Kenya Electricity Modernisation Project targets to connect 630,000 new customers and improve services to the existing ones who stood at 2,774, 216 in June 2014.
“We are making this significant and innovative investment in Kenya’s power sector to expand electricity access to low income households and small businesses as part of the nation’s push for shared prosperity” said country director Diarietou Gaye in the statement. “Modern, reliable electricity will improve the quality of life of Kenyans and underpins enhanced competitiveness of the Kenyan economy”
Kenya Power set a target to connect a million new customers each year from the current financial year, more than double the 443,254 it lit up last financial year.
The new low-cost connections are to be supported by an ambitious Sh77.67 billion ($840 million) ‘Last Mile Connectivity’ power supply infrastructure project to be funded in five phases by African Development Bank and a host other lenders. AfDB disbursed the first $133 million (about Sh12.29 billion) last November.
The World Bank said the Kenya Electricity Modernisation Project would, through technical and financial support, be complementary to the ‘Last Mile’ that targets to connect 75 per cent of total households.
*Constant Munda – The Star