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Why MPs want State to source loans for private power firms

Why MPs want State to source loans for private power firms
Economy

Why MPs want State to source loans for private power firms


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Kenya Power substation in Muthurwa in Nairobi. PHOTO | DENNIS ONSONGO | NMG

Members of Parliament seek to compel the government to source for financiers to give new, cheaper loans to old independent power producers (IPPs) within four years as part of reforms to lower the cost of power.

The National Assembly’s Departmental Committee on Energy wants Energy Cabinet Secretary Davis Chirchir and his Treasury counterpart Njuguna Ndung’u, to help devise ways to help the IPPs refinance their existing loans.

The committee, which is chaired by Mwala MP Vincent Musyoka, in particular wants the CSs to seek the help of the Trade and Development Bank (TDB) for concessional financing.

This will allow the IPPs to settle their existing expensive loans with their current lenders which will lower their loan expenses and offer them more flexible payment terms, says the committee.

“The Cabinet Secretary for the Ministry of Energy and Petroleum in conjunction with the Cabinet Secretary for the National Treasury to explore possible ways of introducing a refinancing initiative with Trade and Development Bank,” said a report tabled by the committee.

“…for the independent power producers who have been in operation for more than 15 years to be able to negotiate better terms and conditions with their respective financiers in order to stimulate economic growth by passing any reduction in tariffs back to the consumer and the economy, within four years upon adoption of the report,” it said.

Also read: AfDB calls on Nairobi to sign fresh power plants

The committee made the recommendations after a benchmarking tour to South Africa in October last year as part of an inquiry into the high of cost electricity in Kenya.

The MPs observed that South Africa had successfully launched a similar refinancing initiative in 2019 for its IPPs which led to lower power prices.

“The economy has resulted in 22 (refinancing) applications being approved to date and has contributed to cost savings of R4.7 billion (Sh39.7 billion) over the remaining terms of the PPAs,” said the committee.

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