Power and Petroleum Regulatory Authority (Epra) Director Basic Daniel Kiptoo. FILE PHOTO | DIANA NGILA | NMG

The power regulator has opposed Kenya Energy’s plans to invoice some electrical energy customers in {dollars} amid issues the utility shall be compensated twice for change charge losses.

The Power and Petroleum Regulatory Authority (Epra) on Tuesday maintained that Kenya Energy is totally compensated for overseas change losses in present payments.

The compensation is completed month-to-month on shopper payments by means of the overseas change surcharge—which reimburses the utility for fluctuations of exhausting currencies for spending denominated in {dollars} and euros corresponding to mortgage repayments.

Epra was reacting to Kenya Energy’s disclosures that it desires customers whose revenues are in {dollars} and euros to pay it utilizing foreign currency.

The utility hopes the settlement of payments in exhausting currencies will protect it from overseas change losses for bills corresponding to mortgage repayments which can be usually dollar-denominated following the depreciating shilling.

“You’ll be able to’t have your cake and eat it, that’s accumulate in {dollars} and have the foreign exchange changes as effectively. It needs to be one,” Daniel Kiptoo, Epra director-general, informed the Enterprise Each day.

“The proposal is their request to resolve a larger macro downside, which is probably not vital if the interventions deliberate by authorities work.”

A wobbly shilling noticed the overseas change fluctuation adjustment rise to Sh1.85 per kilowatt hour (kWh) in February electrical energy payments, from Sh0.73 in August final yr.

Customers paid Sh7.32 billion to Kenya Energy as overseas change losses reimbursement within the yr to June final yr, up from Sh923 million in the same interval in 2020, underlining the burden of the weakening shilling on electrical energy customers.

Which means that Kenya’s electrical energy payments are already dollar-denominated.

The utility agency on Monday disclosed that the continued weakening of the shilling towards main currencies is hurting its monetary efficiency by means of change charge losses.

Learn: Kenya Energy sinks into Sh1.1 billion half-year loss

The rising choice for greenback funds factors to the elevated dollarisation of the economic system, with the shilling weakening towards the greenback by 24 p.c since March 2020 to settle at Sh126.85.

Kenya Energy is looking for to resolve many issues by looking for prospects to settle payments in {dollars} or euros.

The primary is to cushion itself from the weakening shilling in an atmosphere the place the unfold between the financial institution and the official charge is widening.

Whereas the Central Financial institution of Kenya (CBK) is quoting the official common change charge at Sh126.85 a greenback, banks are promoting the buck at Sh137.20 and shopping for the US forex at Sh126.50.

Which means that corporations like Kenya Energy should commit extra shillings in looking for foreign currency to settle their obligations like mortgage repayments and paying mills for wholesale electrical energy.

Secondly, the utility has struggled to entry {dollars} in a market the place producers have repeatedly raised the alarm over the shortage of the US forex.

However the CBK governor, Patrick Njoroge, has at all times insisted that Kenya has adequate overseas forex to satisfy demand, disregarding producers who warned a scarcity of {dollars} could create “a parallel shadow market”.

The shilling is predicted to weaken additional, damage by elevated demand for {dollars} from the power and manufacturing sectors.

“We see the shilling remaining beneath plenty of strain. There’s plenty of demand coming from throughout all sectors, and primarily from the power and manufacturing (sectors),” a dealer at one business financial institution mentioned.

Kenya Energy reckons that the forecast state of the nation’s foreign exchange market will go away the corporate uncovered, particularly when servicing its dollar-denominated obligations.

The corporate noticed its finance prices, that are associated to mortgage repayments, improve to Sh7.39 billion within the six months to December in comparison with Sh6.8 billion in the same interval a yr earlier.

It blamed the weakening of the shilling for the elevated value.

Complete borrowings by Kenya Energy closed the overview interval at Sh103.8 billion, falling barely from Sh105.97 billion.

About Sh17.1 billion of the debt is because of mature earlier than the tip of June, with an additional Sh12.3 billion falling due within the subsequent 12 to 24 months.

The majority of Kenya Energy’s debt is denominated in US {dollars} at Sh76.2 billion whereas shilling-based loans stand at Sh17.5 billion, highlighting the impression of the stronger US forex on the utility’s funds.

Learn: Kenya Energy checks regulator with electrical energy payments set in {dollars}, euros

These in euros stood at Sh10.1 billion. Kenya Energy posted a Sh1.1 billion internet loss for the six months that ended December, marking the primary half-year loss in at the very least 10 years, blamed on the weak shilling and the 15 p.c tariff lower that was effected in January final yr.

It posted a internet revenue of Sh3.82 billion in the same interval a yr earlier.

“This drop is attributable to elevated overseas change losses, and the implementation of the 15 p.c discount of the end-user electrical energy tariff as really helpful by the federal government in January 2022,” Kenya Energy mentioned on Monday.

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