A $457.5 million Electricity Modernization Project to support the Government’s goals
WASHINGTON, March 31, 2015—Over 630,000 Kenyans will benefit from access to electricity, existing consumers will enjoy better quality of electricity services, and the Kenya Power and Lighting Company (KPLC) will be financially stronger as a result of a new project approved by the World Bank Group today.
The World Bank Group’s Board of Executive Directors approved a total of $457.5 million for the Kenya Electricity Modernization Project. The amount includes an International Development Association (IDA)* credit of $250 million, an IDA guarantee of $200 million and a $7.5 million grant from the Strategic Climate Fund-Scaling up Renewable Energy Program. The IDA guarantee will enhance KPLC’s credit quality and enable it to raise about $500 million of new commercial debt with lower interest rates and longer tenors to replace existing debt that is placing a heavy burden on the company.
“We are making this significant and innovative investment in Kenya’s power sector to expand electricity access to low income households and small businesses as part of the nation’s push for shared prosperity” says Diarietou Gaye, World Bank Country Director for Kenya. “Modern, reliable electricity will improve the quality of life of Kenyans and underpins enhanced competitiveness of the Kenyan economy”
Innovation in the new project is reflected in the complementarity of its various elements including technical and financial support for the Government’s electrification “Last Mile” program, financing for new connections and improved service quality, and credit enhancement for KPLC.
The IDA credit, together with the grant, will be used by the Government, KPLC and the Rural Electrification Authority (REA) to finance infrastructure investments and also to support technical assistance and training activities of KPLC, REA, the Energy Regulatory Commission and the Ministry of Energy and Petroleum. The IDA Guarantee will allow KPLC to significantly reduce its financing costs, improve liquidity and continue investing in improving the quality and coverage of its services.
“KPLC is the cornerstone of the energy sector in Kenya and its financial strength is critical to the sector’s sustainability and continued growth. A financially strong KPLC is essential to continue attracting much needed private investment to the sector,” say Pankaj Gupta and Lucio Monari, Practice Managers. “Improved service quality and more reliable electricity service that reduces the duration of outages will allow businesses to operate more consistently and reduce their dependence on costly standby generators.”
In approving the new credit, the Executive Directors were briefed on the recent action taken by the Government to improve governance and to hold public officers accountable.
The Bank’s Country Partnership Strategy (CPS) for Kenya and the Government’s Vision 2030 identify access to modern, reliable electricity as critical to enhancing the prospects for Kenya’s growth, regional competitiveness, and shared prosperity. The World Bank Group will continue to support the private sector, which has such a critical role in electricity infrastructure development in Kenya.
* The World Bank’s International Development Association (IDA), established in 1960, helps the world’s poorest countries by providing grants and low to zero-interest loans for projects and programs that boost economic growth, reduce poverty, and improve poor people’s lives. IDA is one of the largest sources of assistance for the world’s 77 poorest countries, 39 of which are in Africa. Resources from IDA bring positive change for 2.8 billion people living on less than $2 a day. Since 1960, IDA has supported development work in 112 countries. Annual commitments have averaged about $18 billion over the last three years, with about 50 percent going to Africa.