The tariff that India’s Adani Group will charge households and firms for building high-voltage power lines is expected to be disclosed this week in line with the requirements of the Public Private Partnership Act.
The Kenya Electricity Transmission Company (Ketraco) is expected to disclose critical details of the Sh96 billion Adani deal, including “project tariff” and “amount of any public funds committed” to support the firm controlled by India’s second richest person in building and operating three transmission lines and two sub-stations for the next 30 years.
The conglomerate through its subsidiary Adani Energy Solutions Limited and a unit of the African Development Bank were awarded a public-private partnership concession to build the power transmission lines for $1.3 billion.
The firms are expected to recoup their investments through a new charge in households’ monthly electricity bills, which looks set to put upward pressure on inflation in a country where the cost of power has jumped the most over the past five year when compared to core goods.
On Friday, Ketraco and Adani Energy Solutions inked the Sh96 billion deal, which remains subject for review, setting for public disclosure of some of the terms of the agreement.
“A contracting authority shall, on the execution of a project agreement, publish in at least two newspapers of national circulation and electronic media the results of the tender and the following…” reads part of the Act.
On Friday, Ketraco managing director John Mativo said Friday they will publish details of the tender today in two national newspapers.
The results of the tender will contain “the project tariff, if applicable,” which means consumers will get to know whether the deal may result in a spike in power bills or a reduction.
Kenya Power pays Ketraco a fee known as a wheeling charge for the high-voltage power lines at Sh0.82 per unit of power consumed by homes and businesses.
The utility firm paid Ketraco a wheeling charge of Sh2.72 billion in the year to June 2023.
Besides the tariff, the law requires Ketraco to reveal some of the social and economic benefits of the project.
Ketraco is also expected to show that after 30 years, Adani should hand over the assets while they are in good quality.
Ketraco should also disclose the manner in which the project will be monitored and reported during the duration of the project.
Other disclosures include the scope of the project and the duration of the lease.
The India’s conglomerate is expected to generate outsized profits for 30 years before handing over the lines to the Kenya government.
It will spend Sh95 billion on capital expenditure, and expects to generate revenues of Sh634 billion in the 30 years or Sh21.2 billion annually. This excludes other expenses like debt, salaries and maintenance costs.
Ketraco is keen on Adani building the lines and substations for Sh94.5 billion and its revenue expectations to Sh404.3 billion or Sh13.4 billion annually, according to documents seen by the Business Daily.
Adani wants to finance the project using 70 percent debt and 30 percent equity, but Ketraco wants the Indian firm to increase the debt component to 75 percent as it is cheaper than equity.
“As you know equity is more expensive than debt,” said Mativo, while insisting that the two parties are yet to reach financial closure.
Under the PPP deal, Adani is seeking to construct two power transmission lines and two substations.
This includes a 206km 400kV Gilgil-Thika-Malaa-Konza power transmission line that will boost power supply around Nairobi. The line is expected to be completed in 2027.
It will also build the 70km 132kV Menengai-Olkalou-Rumuruti transmission line that will extend high voltage to Olkalou, providing an alternative evacuation path for the Menengai geothermal complex. The line is slated for completion in 2028.
Adani will also build two substations– the 132kV Thurdiburo substation and the 400/220/132kV substation at Rongai—both set to be built by 2028.
Presently, Kenya uses taxes and debt to build the high-voltage power lines through Ketraco.
But with little room for additional borrowing, the State is turning to PPPs to bridge the infrastructure gap.
Ketraco’s deal with Adani Energy has been marred with concerns over how the public participation was conducted, with IC Law LLP, a city law firm, unsuccessfully pushing to have names of other firms that bid alongside Adani Group made public.
IC Law also wanted Ketraco to make public details on the financial health of Adani Energy subsidiary, findings of recommendations from public participation over the deal, and also the legal advice that the office of the Attorney-General gave Ketraco on the deal.
Previous reports by Ketraco had valued the five projects at around $475.38 million (Sh61.2 billion), less than what Ketraco and Adani Energy Solutions announced at Sh33.5 billion.
Dr Mativo explained that the variation was due to the fact that the figures contained in the Transmission Masterplan only focus on Engineering, Procurement and Construction (EPC) costs.
“But you know Adani came in as an investor. Apart from the EPC costs, there is the cost of wayleaves, taxes, project development, project management, cost of insurance and cost of insurance,” said Mativo.
