Kenya Power seeks new bank loans to refinance Ksh.65.5 billion commercial debt


Kenya Power seeks new bank loans to refinance Ksh.65.5 billion commercial debt

In Summary

  • On Wednesday, the firm put up and expression of interest seeking suitable financial institutions for the refinancing of outstanding commercial loans with applications from interested lenders closing on May 17.
  • The refinancing process means that Kenya Power will take new loans with longer tenures and deploy part of proceeds to clear short term commercial loan facilities.
  • Among commercial loans maturing in the short run include Ksh.800 million from a Standard Chartered Bank Money Market Loan which falls due on May 30 and Ksh.2.5 billion Rand Merchant Bank facility maturing on June 30.

Utility firm Kenya Power is looking to take up new bank loans as it moves to retire part of its outstanding Ksh.65.5 billion commercial debt

On Wednesday, the firm put up and expression of interest seeking suitable financial institutions for the refinancing of outstanding commercial loans with applications from interested lenders closing on May 17.

The refinancing process means that Kenya Power will take new loans with longer tenures and deploy part of proceeds to clear short term commercial loan facilities.

This as part of efforts to ease its burdening debt pain which partly comprises of loans maturing in the short term.

According to data from Kenya Power’s annual report covering the year to June 30, 2020, Kenya Power’s total debt portfolio stood at Ksh.118.7 billion at the end of the period including Ksh.65.5 billion in commercial debt.

Additionally, Kenya Power owes the government Ksh.53.3 billion in on-lent loans through the National Treasury.

The report further discloses the utility firm has held discussions with government to retire part of its commercial loans.

“The Government of Kenya is reviewing KPLC’s existing commercial facilities with objective to retire expensive ones through engagement on favorable terms with international partners,” reads part of the report.

“The strategy of the company is to pursue restructuring of short-term commercial facilities (over-drafts) into medium term facility. Towards this objective, the company has managed to obtain bank term loans amounting to Ksh.6.8 billion terming a bigger portion of the existing bank overdraft position. This will see a reduction in finance costs and ease the cash flow strain.”

Among commercial loans maturing in the short run include Ksh.800 million from a Standard Chartered Bank Money Market Loan which falls due on May 30 and Ksh.2.5 billion Rand Merchant Bank facility maturing on June 30.

About Ksh.15 billion of outstanding loans owned by Kenya Power mature within one year while another Ksh.15.2 billion worth of loans maturing in the second year.

An estimated Ksh.75.8 billion of total outstanding debt by Kenya Power is meanwhile denominated in US dollars.

In the financial year ended in June 2020, Kenya Power incurred Ksh.12.5 billion in finance costs including Ksh.6.5 billion in interest payments on loans.

Unrealized foreign exchange differences on loans meanwhile cost the utility firm Ksh.3.5 billion on the back of a weakened Kenya shilling.

During the year, Kenya Power slumped to its first annual loss (Ksh.939 million) in nearly two decades with tax credits from government saving it from a wider dip in earnings.

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