Kenya: State inks Sh70bn power deal with AfDB
7 August 2014
Kenya Power's subsidy programme is set for phase out in a Sh70.1 billion deal that the State has signed with African Development Bank (AfDB) to raise electricity connections to 70 per cent of the population in five years.
Energy secretary Davis Chirchir said the programme would see the installation of additional transformers and power lines to reduce the distance between the grid and customers.
"We look to cut out the power connection subsidy from the government by laying infrastructure which will reduce the distance from the transformers to households and industries," Mr Chirchir told the Business Daily in an interview on Monday.
The campaign is expected to mark an official end to the Sh2.7 billion subsidy programme the State introduced last year to boost rural electrification.
The subsidy made it possible for Kenya Power to retain connectivity fee at Sh35,000 for a single-phase line and Sh45,000 for a three-phase electricity connection within a radius of 600 metres from the nearest transformers.
The real cost of a single-phase connection stands at Sh135,000 while a three-phase connection requires Sh350,000 .
Dubbed "last mile connectivity", the new project will be financed through a concessionary loan from AfDB to be staggered over five years. The first tranche of Sh12 billion is expected to be released in September.
"This project will bring the network close to households, meaning consumers will only pay the standard connection fee," said Mr Chirchir, adding that the connection fee may drop in future since there will less cost incurred with the power grids installed near households.
The move to take transformers closer to customers comes ahead of the expected additional 5,000-megawatt injection into the power grid set to be available by 2016.
Already, the generation of 140MW has started at the Olkaria IV well in Naivasha with another 140MW slated for September from Olkaria One units five and six. "We will dispatch all the 280 megawatts at s even US cents (Sh6.14) per kilowatt hour," said Mr Chirchir.
This signals the beginning of an era of cheap power as the government targets to reduce the cost of electricity to Sh9.10 (¢10.45) per kilowatt hour from the current average of Sh17.20 (¢19.78) per unit for domestic households.
Original article by Neville Otuki