Kenya Power defaults on payment of power worth Sh21b

Thursday, July 20th, 2023 05:30 | By
Kenya Power
Kenya Power. PHOTO/Courtesy

Kenya Power has defaulted on paying three Independent Power Producers (IPPs) Sh21.36 billion for wholesale electricity supplied in 2023 amid financial woes.

Kipeto Energy Plc, which has since written to the National Treasury concerning the arrears, has not been paid $28.55 million (Sh4.03 billion) for the past five months, according to documents seen by Business Hub.

Kipeto received only $4.19 million (Sh590.79 million) in 2023 as a partial settlement of the $7.83 million (Sh1.1 billion) January invoice.

Kenya Power has also not cleared £67.16 million (Sh10.6 billion) owed to Lake Turkana Wind Power (LTWP) that accrued in the five months through June 2023.

OrPower4 Inc., the only private geothermal producer in the country, is demanding $47.71 million (Sh6.73 billion) as of July 14, 2023, bringing the total dues payable to the three IPPs to Sh21.36 billion.

The defaults by the power distributor is already in breach of the Power Purchase Agreements (PPAs) which require the clearing of monthly arrears within 30 days, failure to which the National Treasury should settle the dues.

Most PPAs have letters of support from the exchequer compelling it to take over defaults and interests accruing by the time of payment.

While appearing before the National Assembly Departmental Committee on Energy, Kipeto Energy said the delayed payments have strained its books considering the firm is barely two years since the commissioning of its 100 megawatts (MW) plant in Kiserian in 2021.

“We are not doing very well because we are owed a lot in 2023. They have just finished paying our January invoice. Invoices for power we have sold for five months have not been paid. Our lenders are around our case, our local investments are hurting,” Kipeto Chairman Kenneth Namunje told the committee.

Active contracts

The three firms account for about 42 per cent or 550 megawatts (MW) of the total 1312.77 MW capacity contracted from the 21 IPPs that are currently dispatching power to the national grid. Kenya Power has a total of 30 PPAs, meaning there some IPPs with active contracts but are not dispatching power.

Orpower4 charges Sh13.809 per unit from its four different power plants that have a combined contracted capacity of 150MW while Kipeto’s rate is $0.12 (Sh16.9) for every unit.  LTWP, which has a contracted capacity of 300MW, charges $0.0795 (Sh11.2) per unit of its wholesale power. “This amount (£67.16 million) consists of five currently unpaid LTWP invoices (February-June 2023) to KPLC,” LTWP CEO Phylip Leferink said.

The defaults mirror the financial strain that has hit Kenya Power in the last two years amid revenue dip, system losses, and dollar shortage that has left the utility struggling to honour obligations priced in foreign currencies.

Documents submitted by the power utility to the energy committee last week indicate between Jan and May 2023, it had spent only Sh2.33 billion to pay 30 IPPs, meaning there are chances that more power firms are also owed. 

Kenya power is yet to disclose its full financial standing for the year that ended last month. However, by May, it had already issued a profit warning for the financial year ending June 2023, preparing investors for a drop of at least 25 per cent of net profit owing to the dollar crunch.

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