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World Bank to provide financial backing to lower electricity bills

NEWS
By Dominic Omondi | Jan 26th 2022 | 3 min read
By Dominic Omondi | January 26th 2022
NEWS

A view of Stima Plaza building on July 10, 2019, in Parklands, Nairobi.[Edward Kiplimo, Standard]

The government will soon give Kenya Power Sh7.5 billion to restructure the power purchase agreements it has with independent power producers, according to the International Monetary Fund (IMF). 

Part of the money will come from the World Bank and is aimed at reducing the cost of electricity.

IMF said the World Bank’s upcoming Development Policy Operation (DPO) will be used to support efforts to address Kenya Power’s financial difficulties.

“Policy priorities for the WB’s (World Bank’s) planned early 2022 DPO include a review of signed power purchase agreements (PPAs) that have not reached financial closure or started construction to reduce cost of supply (in particular of green energy),” said the IMF in a statement released late last year.

Efforts to get information from the World Bank on when the funds will be released were unsuccessful as our calls and text messages were unanswered.

A source at the National Treasury said the money might be released this week.

President Uhuru Kenyatta hopes to reduce the cost of electricity by 30 per cent by end of March by compelling Kenya Power to restructure the agreements it has with independent power producers (IPPs).

Already, the first phase of the reduction has been implemented with the cost of power going down by 15 per cent through a raft of reforms that affected the entire power supply chain.

However, there have been reports that some IPPs have been reluctant to sign on the dotted line which would reduce their earnings.

By end of December, Kenyan authorities were supposed to present to the IMF a plan to address the financial vulnerabilities of the power distributor based on the findings of a taskforce appointed by President Kenyatta.

Review agreements

Part of the recommendations of the taskforce was a review of the PPAs and fast-tracking the company’s restructuring. In November, Kenya Power’s management was replaced and a forensic audit of the firm’s procurement practices launched.

To this end, the National Treasury is expected to provide the power firm with Sh7.5 billion, which will be used to clear much of the government’s outstanding arrears to the company for last mile electrification.

Kenya Power has in the last year been on the spotlight with Uhuru triggering a purge on its operations and management by appointing a taskforce to look into the entire power value chain.

The aim of the probe is to clean the power distributor and bring down the cost of electricity.

Upon assuming office after President Kenyatta made changes to the Cabinet in September 2021, Energy Cabinet Secretary Monica Juma said she would steer the crucial docket to perform better.

She said she had already met with the teams that drive the energy sector and had agreed on the path of action, including implementation of the recommendations of the presidential taskforce.

The changes in the Energy ministry came at a time of uneasiness at Kenya Power, with the exit of Chief Executive Bernard Ngugi and the board being under probe by the Ethics and Anti-Corruption Commission over alleged boardroom wars.

Kenya Power is the sole power distributor but has recently been making losses.

Part of the reason for the utility’s dismal financial performance has been poor governance, corruption, inefficiency, wastage, and high cost of power from producers that has not been compensated by an equivalent increase in what it charges consumers for the electricity consumed.

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