- The move is part of the electricity distributor’s efforts to boost its liquidity position amid mounting supplier debt and losses.
- Most of Kenya Power’s current commercial loans are denominated in US dollars and have interest rates ranging from 2.5 per cent to 5.75 per cent plus a Libor margin.
Kenya Power #ticker:KPLC has invited local and international banks to offer it new cheaper loans that will be used to retire some of its Sh55 billion worth of commercial debt, potentially reducing its finance costs by hundreds of millions of shillings.
The move is part of the electricity distributor’s efforts to boost its liquidity position amid mounting supplier debt and losses.
“The Kenya Power and Lighting Company Plc is seeking Expressions of Interest (EOI) from suitable financial institutions for the refinancing of its commercial debt,” the Nairobi Securities Exchange-listed firm said in a notice.
Interested financiers have up to May 17 to submit their documents.
Mr Stephen Vikiru, Kenya Power’s general manager for finance, said the company is seeking to take advantage of ultra-low interest rates in developed markets such as Europe and the United States to refinance its existing debt.
“Interest rates are now low compared to five or six years ago. We can get banks that will offer us lower interest rates that are also profitable for them,” he said.
Mr Vikiru added that the company is seeking financiers offering both lower rates and longer loan life, noting that the value of the loans that will ultimately be refinanced will depend on the offers received.
The process could take up to six months. Most of Kenya Power’s current commercial loans are denominated in US dollars and have interest rates ranging from 2.5 per cent to 5.75 per cent plus a Libor margin.
Libor is an acronym for London Inter-bank Offered Rate (Libor), a global benchmark. Mr Vikiru said some of the loans have fixed interest rates, meaning the utility has not benefited from the recent drop in the base rate to below one per cent.
Kenya Power’s current lenders include Standard Chartered Plc #ticker:SCBK whose total outstanding loans as of June 2020 was Sh39.3 billion, Rand Merchant Bank (Sh2.4 billion) and Equity Bank #ticker:EQTY (Sh4.9 billion).
Mr Vikiru said that the government, Kenya Power’s majority shareholder with a 50 per cent stake, has not ruled out offering guarantees to attract financiers to participate in the debt refinancing.