Kenya Power is seeking approval to bill some electricity consumers in dollars, euros, and other foreign currencies amid rising exposure to the depreciating shilling and biting shortages of forex in the domestic market.
The country’s sole electricity distributor said it has embarked on preliminary engagements with the market regulator, the Energy and Petroleum Regulatory Authority (Epra) to guide a base rate that would be used in tariff determination for those paying in foreign currency.
Kenya Power hopes this move will enable it to generate a reliable source of foreign currency to comfortably meet its obligations denominated in foreign currencies.
“Our electricity sales are 100 per cent in Kenya Shillings. Having Power Purchase Agreements in different currencies leaves us with foreign exchange risk,” Stephen Vikiru, the general manager in charge of finance at Kenya Power told Nation.
“We want to look at our customers whose income is in foreign currencies such as the export processing zones, foreign missions, and the horticulture industry and engage them to be able to pay us in hard currency.”
Kenya Power said the present state of the country’s forex market has left the company exposed, especially when servicing its dollar-denominated obligations.
“The forex problem has been two-fold. The first is the fluctuation of the rate. Right now, if you go to market, you are buying a dollar at 126 to the Kenya Shilling which is a significant spread from the official rate. The second is the availability of foreign currency. Even with that spread, you are not able to get foreign currency,” the official said.
In the full year ended June 2022, Kenya Power’s loan payments climbed by a staggering 40 per cent to Sh 12.7 billion, largely driven by the weakening of the shilling against the greenback. The company’s loan is 90 per cent constituted by foreign currency borrowings, leaving it vulnerable in the event of local currency depreciation and inaccessibility of hard currency.
“At Kenya Power, we have a requirement of close to $50 million per month, and some months when we have debt service obligations it goes up to $70 million,” Vikiru said.
“This is forex that we would typically get without a struggle but currently, some of the banks out there do not give quotes and others give quotes for very small tickets so you would be looking for $10 million and you are getting quotes of less than $1 million.”
Zimbabwe’s central bank in July approved a regulation that allows the country’s power utility to bill the exporters of goods and services in dollars, euros, and other foreign currencies.