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Kenya Power in ambitious plan to connect 300,000 to national grid

BUSINESS
By Macharia Kamau | Jul 23rd 2014 | 2 min read
By Macharia Kamau | July 23rd 2014
BUSINESS
Kenya Power staff replace wooden electric poles with one made of concrete along Obote Road in Kisumu County, using the hydraulic power-assisted steering (HYPAS) mounted on one of their lorries. Cases of falling electric poles have been reported especially during the rainy seasons.PHOTO BY RUSHDIE OUDIA. JULY 12, 2014

The new customers will only pay Sh7,000 as deposit

Kenya power will over the next two months start connecting new customers to the national grid on credit and recover connection fees over a two year-year period through monthly bills.

The utility firm said it would connect 300,000 new customers over the next four years without requiring them to pay an upfront fee of Sh35,000, which is the cost of getting a single phase connection at the moment. Kenya Power said it would use a Sh3.6 billion loan from the French Development Agency (AFD) and the European Union to undertake the project.

In addition to loans that will be processed by Kenya Power, the utility firm also said it has partnered with Equity Bank and National Bank in an arrangement that will see the two banks finance new customers to get connected.

The power firm, however, said the loans advanced by the two banks will be under different terms, which might mean that customers might pay higher interest rates.

Kenya Power Managing Director  Dr Ben Chumo said the project is an upgrade of Stima Loan service the utility firm has been piloting since 2010, through which 53, 836 new customers have been connected at a cost of Sh1.2 billion.

He also said the first tranche of the loan facility amounting to Sh480 million will be disbursed in the next two months and will mainly benefit applicants for single phase electricity connections whose quotations do not exceed Sh35, 000.

"Stima Loan is one of the initiatives we are spearheading in collaboration with the Government, AFD and EU to ease the cost of power connections and help accelerate access to electricity by more Kenyans in line with the country's development vision," said Dr Chumo.

New customers will be required to pay 20 per cent of the connection fee, which translates to Sh7, 000 deposit while the remaining Sh28, 000 will be repayable over a two-year period. The loan will attract what Kenya Power terms as an administration fee of five per cent.

"A five per cent administration fee is charged on the loaned amount. The period of disbursing subsequent Stima loan tranche amounting to Sh472 million (4 million Euros) will depend on the rate of loan uptake," Chumo explained.

He observed that while Kenya Power handles the bulk of Stima Loan applicants, it has partnered with local banking institutions including Equity Bank and National Bank of Kenya under different terms for ease of financing for its customers.

Dr Chumo added that other prospective financiers under the new power connection scheme are currently at different stages of evaluation by the company.

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