Companies

Kenya Power pays US firm Ormat Sh2.6 billion to allay default fears


New Content Item (1)

A KPLC worker pulls wires as they did the power line transfer on Kisumu-Busia road. PHOTO | TOM OTIENO | NMG

brianngugi_img

Summary

  • The money was part of a total pending bill of Sh2.92 billion owed to the Naivasha-based geothermal power producer that was due to be paid by the end of December.
  • Kenya Power’s net profit for the six months to December jumped over 27 times to Sh3.81 billion from Sh138 million in a similar period a year earlier on the back of higher electricity sales and lower operating costs.

Kenya Power #ticker:KPLC has cleared a Sh2.6 billion power purchase bill owed to US energy firm Ormat Technologies, allaying fears of a default that would have seen the American firm bill the Treasury.

The money was part of a total pending bill of Sh2.92 billion owed to the Naivasha-based geothermal power producer that was due to be paid by the end of December.

Kenya Power is now left owing Sh296.4 million.

“As of December 31, 2021, the amount overdue from KPLC in Kenya was $25.5 million of which $22.9 million was paid in January and February of 2022,” revealed Ormat Technologies in regulatory filings with the US Securities Exchange Commission (SEC).

Ormat operates within the Naivasha-based Olkaria III complex through its wholly-owned subsidiary, OrPower 4, Inc., where it outputs 150 megawatts of geothermal power.

According to Ormat, although Kenya Power was 63 days late in making payments, it is confident that the utility will clear the receivable since agreements with the utility firm also contain a support letter from the government.

“There has been deterioration in the collection from KPLC that became slower than in the past… the Company believes it will be able to collect all past due amounts in Kenya,” said Ormat.

The New York Stock Exchange-listed Ormat said its total revenues from Kenya Power last year dropped by 10.94 percent to $102.8 million (Sh11.8 billion) from $115.4 million (Sh13.1 billion) the previous year.

The firm disclosed that in the year to December 15.5 percent of its total electricity revenues came from Kenya.

“A substantial portion of international revenues came from Kenya and, to a lesser extent, from Honduras, Guadeloupe, Guatemala and other countries. Our operations in Kenya contributed disproportionately to gross profit and net income,” it said.

20-year PPA

The company sells the electricity produced by the power plants in Naivasha to Kenya Power under a 20-year PPA ending between 2033 and 2036.

Kenya Power booked the third-largest power purchase bill from OrPower 4 in the year ended June last year after Kenya Electricity Generating Company (KenGen) (Sh41.1 billion) and Lake Turkana Wind Power (Sh17.3 billion) according to the electricity utility’s latest annual report.

Kenya Power’s net profit for the six months to December jumped over 27 times to Sh3.81 billion from Sh138 million in a similar period a year earlier on the back of higher electricity sales and lower operating costs.

[email protected]