July 28, 2014

The Kenyan government plans to increase its customers’ access to electricity to 70 percent in five years from the country’s current 32 percent, according to Kenya Energy and Petroleum Cabinet Secretary Davis Chirchir.

Chirchir said on Monday during a media briefing that Kenya Power is in advanced-stage negotiation with African Development Bank (ADB) for a $684 million (Shs.60 billion) loan to finance its ambitious plan.

The deal is expected to be completed by December to pave way for the first tranche of the loan amounting to $138 million (Shs.12 billion) to be disbursed this financial year.

Like most African countries dealing with power shortages and outages due to aging grids and power infrastructure, the East African country is looking for ways to increase customers’ electricity connection.

Chirchir said the funds will used to take electricity closer to potential electricity users and increase the number of customers from the current 2.8 million to approximately 8 million in five years.

The company has recently begun upgrading its electricity grids’ transmission and distribution systems in various parts of the country to speed up generation projects that will inject 5,000 megawatts of additional electricity capacity that will be distributed to consumers in a more efficient way.

Speaking at the event, Kenya Power Managing Director and Chief Executive Officer Ben Chumo said the ongoing countrywide power upgrade projects will help manufacturers increase their productivity and create jobs while at the same time increasing the country’s gross domestic product.

“Reduction in power supply interruptions will also translate to better unit sales for Kenya Power,” said Chumo.

Last week the company received a Shs.3.6 billion (30 million Euros) loan approval from the European Union and French Development Agency to help provide financing to about 300,000 customers through a Stima Loan arrangement in the next four years.

The Stima loan is one of the initiatives spearheaded by the company in collaboration with the government, AFD and EU to ease the cost of power connections and help accelerate access to electricity by more Kenyans in line with the country’s development vision.

The first batch of the loan, $5.5 million (Shs.480 million) will be disbursed in the next two months and will mainly benefit applicants for single-phase electricity connections whose quotations do not exceed Shs.35,000.

The Chumo said the Stima loan program follows a successful pilot project begun in 2010 which has seen 53,836 Kenyans benefit (as of June) at a total cost of $13.7million (Shs.1.2 billion).

The loan has a 5 percent administration fee that is charged on the amount of loan and is managed as a revolving fund. Stima loan customers will pay a 20 percent upfront deposit and repay their loan within 24 months.

Kenya Power said it will handle the bulk of Stima loan applicants, but has also partnered with local banking institutions including Equity Bank and National Bank of Kenya to help administer the loan under different terms for ease of financing for its customers.