Kenyan authorities on Tuesday failed to disclose the proposed tariff that Indian conglomerate Adani Group will impose on households and businesses for building high-voltage power lines, which does not meet legal requirements for full disclosure.
The PPP law requires that a government agency sponsoring the deal publish in at least two national newspapers details regarding the project agreements, including the “project tariff, if any.”
On Tuesday, Kenya Electricity Transmission Company (Ketraco) published details of Adani’s Sh96 billion deal in a national newspaper, The Star, but failed to disclose Adani’s proposed tariff.
Ketraco described calls to release the proposed tariff as premature, even as it revealed other elements of the Adani deal, including its expected annual revenue of $164.09 (Sh21.2 billion) – which forms the basis for the tariff calculation.
The group, through its subsidiary Adani Energy Solutions Limited and a unit of the African Development Bank, has secured a public-private partnership concession to build power transmission lines for $1.3 billion.
The companies are expected to recover their investments by imposing new fees on households’ monthly electricity bills, which are technically called payment fees.
Besides the expected revenue, Ketraco published the project cost (Sh95.16 billion), debt-to-equity ratio (70:30), cost of debt (11.5 percent) and return on equity of 16 percent.
Ketraco noted in the filing that it will push to reduce the cost of the project through competitive sourcing of materials, concessional debt and lower returns to reduce projected revenues and ultimately reduce transportation fees.
However, the government agency failed to disclose the expected tariff, adding a layer of secrecy that has fueled opposition to Adani’s projects and weakened overseas expansion plans of companies owned by Gautam Adani, India’s second-richest man.
Regarding the power deals, Adani is expected to build and operate three transmission lines and two substations for a period of 30 years.
“If we are still negotiating fiscal terms, how can we have tariffs?” Ketraco Managing Director, John Mativo, asked for a phone interview with Daily choresHe said the financial details of the deal, including the proposed tariff, are still under discussion.
Dr Mativo said Ketraco and Adani Energy Solutions have achieved commercial closure and are working towards financial closure.
“The law gives them 365 days to obtain financial closure,” he added, noting that Adani’s final financial proposals are awaiting credit terms from financiers and competitive bids for the construction of high-voltage lines and stations.
Adani is facing stiff opposition to his plan to take a 30-year lease to operate Nairobi’s Jomo Kenyatta International Airport (JKIA), which has sparked a court battle.
At present, Kenya is using taxes and debt to build high-voltage power lines through Ketraco.
Kenya Power pays Ketraco a transmission fee for high-voltage power lines of Sh0.82 per unit of energy consumed by homes and businesses.
The utility company paid Ketraco transmission fees worth Sh2.72 billion in the year to June 2023 for the lines built with taxpayers’ money.
But with little room for additional borrowing, the country is turning to public-private partnerships to plug the infrastructure gap, fueling the market for companies like Adani.
The Indian group is expected to make huge profits for 30 years before handing over the lines to the Kenyan government.
It will spend Sh95 billion on capital expenditure, and expects to generate revenues of Sh634 billion in 30 years or Sh21.2 billion annually. This does not include other expenses such as debt, salaries, and maintenance costs.
Ketraco is keen for Adani to build the lines and substations for Sh94.5 billion and forecasts its revenue to be Sh404.3 billion or Sh13.4 billion annually, according to documents seen by Daily chores.
Adani wants to finance the project using 70 percent debt and 30 percent equity, but Kitraco wants the Indian company to increase the debt component to 75 percent because it is cheaper than equity.
“As you know, equity is more expensive than debt,” Dr. Matevo said.
Under the PPP deal, Adani seeks to build two power transmission lines and two substations.
This includes the 206 km, 400 kV Gilgil-Thika-Malaa-Konza power transmission line which will boost power supply around Nairobi. The line is expected to be completed in 2027.
Adani will also build a 70 km, 132 kV Menengai-Olkalou-Rumuruti transmission line that will extend high voltage to Olkalou, providing an alternative evacuation route for the Menengai geothermal complex. The line is scheduled to be completed in 2028.
Adani will also build two substations – the 132 kV Thurdiburo substation and the 400/220/132 kV substation at Rongai – both of which are scheduled for completion by 2028.
At present, Kenya is using taxes and debt to build high-voltage power lines through Ketraco.
But with little room for additional borrowing, the country is turning to public-private partnerships to plug the infrastructure gap.
Ketraco’s deal with Adani Energy has been marred by concerns about how public engagement will be conducted. IC Law LLP, a city-based law firm, had unsuccessfully tried to push for the names of other companies that had bid besides Adani Group to be made public.
The law firm also asked Ketraco to make public details of the financial position of its Adani Energy subsidiary, the results of public engagement recommendations on the deal, as well as the legal advice the Attorney General’s Office provided to Ketraco on the deal.
Previous reports by Ketraco valued the five projects at about $475.38 million (Sh61.2 billion), lower than the Sh33.5 billion announced by Ketraco and Adani Energy Solutions.
Dr Mativo explained that the difference is due to the fact that the figures in the transport master plan focus only on engineering, procurement and construction (EPC) costs.
“But you know Adani came in as an investor. Apart from EPC costs, there is road leave cost, taxes, project development, project management, insurance cost and insurance cost.