Kenya Power has taken a Sh. 6.75 billion loan from NCBA Bank Group. The loan has catapulted NCBA to the largest creditor for the national power provider. The new loan has a term of 12 years. It has a repayment moratorium of 36 months from September 2020.
Details of this mega loan are contained in the Kenya Power annual report for the financial year which ended June 2021.
“Debt refinancing/restructure has been identified as one of turn around strategies which is being done. Procurement process for the refinancing is currently ongoing. During the current financial year Sh. 6.7 billion worth of overdraft was converted into a term loan,” Kenya Power said. “The balance of the overdraft has also gradually reduced with the increased revenue collection. The company has also reduced its dependency on overdrafts.”
According to the report, Kenya Power took the loan at an interest rate of nine percent, which comprised of the Central Bank Rate currently at seven percent plus a two percent margin.
The new loan is the second major loan facility the power provider has taken from a local lender. Kenya Power also owes Equity Bank some Sh. 4 billion. In its last financial year, Kenya Power announced that it had paid loans worth Sh. 20.2 billion, up from Sh.12.4 billion the year before that. “Finance costs registered a 27.5 percent reduction from Sh. 12.47 billion to Sh. 9.05 billion due to a decrease in loans and overdrafts as a result of a Sh. 20.26 billion repayment of commercial loans which included the partial conversion of overdrafts into a term loan,” the company said in its annual report.
Local banks’ CEOs pushing to increase cost of loans report CBK to IMF
Currently, Kenya Power is working to renegotiate its debt in a bid to reduce interest expenses and boost its cash flows. The company invited expressions of interest (EOI) for the commercial debt refinancing in April 2021 and request for proposals were issued to the bidders with a closing date of August 6 2021. It was not immediately clear which lenders signed up for the debt restructuring.
