Kenya Power freeze puts new energy plant billions on the line
Mr Mohamed said electricity generation has overshot Kenya’s Power ability to absorb it, hence the need for a moratorium on any new projects.
The decision means investors who have lined up energy projects could be left in limbo with billions of dollars of investments getting stuck until the freeze on new power deals is lifted.
This is against a peak demand of 1,802 MW, with the balance being the reserve power meant for emergency situations such as plant repair shutdowns.
President Uhuru Kenyatta’s administration in 2013 set an ambitious plan to instal an additional 5,000 MW to the national grid by 2017 from renewable sources such as geothermal, solar and wind farms with a target to connect all homes to power by 2020.
“We are going to have more due diligence to see that they are coming in at a time when we can meet the demand,” said Mr Othieno.
Thermal capacity increased by 5.3MW to 806.9MW while solar capacity increased by 0.1 MW to 0.7 MW in 2017. Installed capacity for geothermal, wind and co-generation remained at the same level in 2017 as in 2016.
“Right now Kenya Power is obligated to pay for such deemed oversupply …of course hitting its finances. Therefore Kenya Power board of directors will in future consider PPAs based on demand,” said the Kenya Power chairman.
“It’s an important positive step but work remains to be done,” said risk management expert Deepak Dave of Riverside Capital, a Nairobi-based advisory firm that has been engaged in PPAs before.
“It’s about time generation, transmission and distribution lined up, and they need to comfort the market that it’s not a case of them being on the hook for cash they won’t be collecting.”
KenGen, which accounts for some 75 per cent of power purchased by Kenya Power, saw its investors in December raise concerns about debt owed to the electricity generator by the distributor amid the latter’s financial headwinds.
KenGen shareholders during the company’s Annual General Meeting sought assurance from their board that the Kenya Power debt, which is booked as Sh21.8 billion as at the end of the financial year, will be cleared.
Kenya Power paid off KenGen a total of Sh18 billion after closure of its annual financial report, leaving a balance of about Sh3.3 billion, but new billings have since raised this amount to Sh15.5 billion as at Tuesday.
But taxpayers should raise Sh9 billion to pay off the owners to disconnect the plants from the national grid or allow them to run down their contracts set to expire within five years, Mr Keter said.