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Kenya Power gets external debt relief in cost cutting effort

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Electricity distributor Kenya Power has received a debt relief from 14 foreign-based lenders as it races to cut costs and protect itself from dipping into losses.

Kenya Power Managing Director Bernard Ngugi said the utility company has secured a 12- month moratorium on the foreign loans and is in talks with local banks to reschedule its multibillion-shilling debt.

The firm is seeking to make savings from the Sh6.8 billion it paid banks and other lenders as interest expense in the year to June 2018.

Kenya Power has already issued its third profit warning in a row, citing reduced electricity consumption due to coronavirus control measures and rising cost of buying wholesale power from firms like KenGen.

The alert means its net earnings will decline by at least 25 percent of last year’s profit of Sh262 million- which was the worst in 16 years.

 “The government has helped us in negotiating for one-year moratorium on the on-lent debt and that can possibly be extended and we are also engaging a financier to take on board our commercial debt of about Sh60 billion so that we can convert it to a longer period and gain fresh momentum to recover,” said Mr. Ngugi.

He added that Kenya Power was also in talks with five commercial lenders to restructure its debt, which stood at Sh68.3 billion in June 2018.

The firm’s main commercial lenders include Standard Chartered Bank, Rand Merchant Bank, Equity Bank and Stanbic Bank.

Government-guaranteed foreign debt stood at Sh44.7 billion and was tapped from institutions like International Development Agency (IDA), China Exim Bank and Japan Development Bank.

Only three out of the 21 commercial and guaranteed loans were denominated in Kenya shillings, making their cost susceptible to currency fluctuations.

The loans data is based on the 2018 Annual report because Kenya Power is yet to release the 2019 document.