Kenya Power Company has received approval from the regulator and government to bill some of its customers in U.S. dollars, a significant win for the firm whose recent performance has been adversely affected by foreign exchange losses.
According to local reports, the company is setting up accounts to enable the collection of electricity bills in U.S. dollars, Euros and Sterling Pounds from customers that are willing and able to pay their bills in foreign currency.
“There was a lot of engagement on this right from the top, including the regulator and the government, and we got the necessary approvals. We are in the process of opening collection accounts in a manner that is well interfaced with our systems,” said Kenya Power Finance Manager, Stephen Vikiru.
The company has reportedly been suffering significant forex losses during the current financial year 2023/2024 as finance costs more than doubled to KES 15.02 billion ($105.2 million), marking a sharp increase from KES 7.39 billion ($51.7 million) in the preceding year.
“This increase is attributed to the rise in unrealized foreign exchange losses on loan revaluations, a consequence of the weakening of the Kenya shilling (KES) against major foreign currencies in which most of the loan portfolio is denominated,” said the firm.
In the last few years, the Kenyan Shilling (KES) has depreciated significantly against major global currencies. For instance, the 2022/2023 financial year opened with the Shilling trading at KES 117.87 against the dollar but closed at KES 140.6, a depreciation of 19.2 percent within the year.
However, the Shilling, currently exchanging at ~146 units for a dollar, has experienced some reprieve in February 2024 following a EuroBond sale that has shifted it from being one of the worst-performing African currencies this year to the strongest.
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African currencies dominate Bloomberg's worst-performing list with the Angolan Kwanza, Malawian Kwacha, Zambian Kwacha, Burundina Franc, Congolese Franc, and Kenya Shilling also in the list of 10… pic.twitter.com/8zy2og2dWC
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- Against the Sterling Pound, the Kenyan Shilling depreciated by 23.9 percent during the period, dropping from KES 142 in July 2022 to KES 176 in June 2023.
- Similarly, the Shilling experienced a 22 percent decline against The Euro and
- A 10 percent decrease against the Chinese Yuan
While there have been complaints of shortage of dollars in the country, Kenya Power is said to be one of the largest buyers of foreign currency in the country and has encountered challenges in securing foreign exchange to settle its obligations to power suppliers and external creditors.
It remains to be seen if other state entities acquire the same rights.
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