- The bank, listed on the Nairobi Stock Exchange, offered the 12-year loan on October 9, 2020.
- Details of the loan were disclosed in Kenya Power’s annual report for the year ending in June.
NCBA Bank Kenya #ticker: NCBA Kenya loaned Power #ticker: KPLC 6.75 billion shillings, becoming the largest domestic lender to the electricity distributor through the acquisition of the company’s overdraft facility.
The bank listed on the Nairobi Stock Exchange offered the 12-year loan on October 9, 2020. Details of the loan were disclosed in Kenya Power’s annual report for the year ending June.
“Debt refinancing/restructuring has been identified as one of the transformation strategies being undertaken. The purchase of refinancing is currently underway. During the current fiscal year, an overdraft of Sh 6.7 billion has been converted into a term loan,” the report states, Kenya Power”.
The overdraft balance also gradually decreased with the increase in revenue collection. The company has also reduced its reliance on overdrafts.”
The NCBA loan is denominated in local currency and has an interest rate of nine percent – currently including the central bank rate of seven percent plus a 2 percent margin.
The loan origination fee is paid by NCI as well which are charged by the banks to process the loan application as part of the total loan amount.
Rand Merchant Bank, NCBA and Standard Chartered Plc charged Kenya Energy a combined fee to create a loan of Sh794.9 million in the year to June.
Kenya Power said the NCBA loan has a 36-month payment deferral from September 2020.
Among the other local lenders that have made loans to the utilities company is Equity Bank, which has a debt of Sh4 billion.
Kenya Power has also borrowed heavily from foreign development finance institutions and banks. NCBA is the last to disburse a loan to Kenya Power as the amounts owed to other commercial banks are reduced on repayment.
The electricity distributor repaid Sh20.2 billion in loans in the review period, up from Sh12.4 billion a year earlier.
For example, Kenya Power settled Stanbic Bank’s 2 billion shillings of shillings while the outstanding amount on one of Standard Chartered plc’s loans fell to 25.7 billion shillings from 29.3 billion shillings. New loans to Kenya Power fell to Sh8.5 billion from Sh14.6 billion.
These moves saw financing costs fall to Sh9 billion from Sh12.4 billion.
“Finance costs recorded a decrease of 27.5 percent from Sh12.47 billion to NIS 9.05 billion as a result of lower loans and overdrafts as a result of the repayment of Sh20.26 billion business loans which included partial conversion of the overdraft into a term loan,” the utility company said.
The company, which has been receiving forgiveness from lenders for breaching liquidity ratios, plans to further renegotiate its debt with the aim of reducing interest expenses and boosting cash flow.
The company called for Expressions of Interest (EOI) for commercial debt refinancing in April and a RFP was issued to bidders with a closing date of August 6.