Plive.co.ke Logo
Go

Electricity Kenya has taken its first step to bring down the cost of electricity

  • Published:

Kenyan shilling was exchanging at Sh85 against the dollar five years ago but has weakened to Sh101 currently; meaning that Kenyans could be paying 15% more on dollarized loans.

play Kenya has taken its first step to bring down the cost of electricity. (the star)

Kenya has taken the first step in bringing the cost of electricity down and cushioning consumers from high electricity bills.

The country now wants electricity producers to sign Power Purchase Agreements, PPA in local currency instead of foreign currencies such as US dollar in a bid to shield consumers from sudden spikes in prices when the shilling depreciates against major global currencies.

Loans advanced to power sector firms for infrastructure projects such as power generation plants and transmission lines are mostly in US dollars.

play Energy Cabinet Secretary(CS) Charles Keter. (Kenya Engineer)

 

Ministry of Energy commissioned a study that seeks to compel all power producers setting up new plants with a capacity of 10MW to sign PPAs with Kenya power denominated in local currency.

According to the study report which was done by Dalberg Advisors and funded by Guarant Co, a company which mobilizes local currency investments in infrastructure projects, the study found out that projects of 10MW and below can comfortably be financed in local currency by local banks and institutional investors.

The report, however, gave leeway to projects above 10MW who can be allowed to source a hybrid tariff with partial indexing to hard currency as the most viable option.

“Considerations can be given to large power projects, which cannot be completely financed by local currency and therefore take hard currency financing,” said the consultants.

play Ministry of Energy commissioned a study that seeks to compel all power producers setting up new plants with a capacity of 10MW to sign PPAs with Kenya power denominated in local currency. (5news.)

 

And that is not all, the Ministry of Energy also wants industry players to source some of their project financing locally in a long-term plan that is expected to bring down the cost of power by reducing the foreign exchange component in the bill.

While the report still has a long way to go it is not hard to see the economic sense of adopting local currencies.

Kenyan shilling was exchanging at Sh85 against the dollar five years ago but has weakened to Sh101 currently; meaning that Kenyans could be paying 15% more on dollarized loans.

Kenya like most developing countries experience delays in completion of infrastructure, it is sadly a normal occurrence, and in such cases, the country which normally ends up paying millions of dollars in fines can at least cushion itself.

play Lake Turkana wind power project (Construction Review Online)

 

Kenya recently awarded a consortium of Chinese companies a Sh9.6 billion ($93m) contract to complete the transmission line linking Lake Turkana Wind Power to the national grid by August 31 as it races against time to complete the full operations of the project and avoid further penalties.

This is after the 428-kilometre power line currently 70 per cent completed, according to Kenya Electricity Transmission Company (Ketraco) was hit by a series of hitches and delays after Spanish firm Isolux contract was revoked last year following the firm being placed under receivership.

The country has already been fined Sh5.7 billion ($55m) for the delays of the high-voltage line (400 kilovolts) and the ministry of Energy early this year said further delays beyond June would attract a Sh1 billion ($9.7m) fine monthly to be absorbed by taxpayers through their power bills.

Subscribe to the Pulselive Newsletter!