Framed in KETRACO’s efforts to improve its financial stability, to attain self-sufficiency and to obtain monitoring tools which can provide reliable financial projections, to be used by the company and to be presented to third parties, specifically, to financial institutions. MRC has assisted the company in developing an investment and financing strategy that allows the company to implement its corporate strategy without compromising its financial sustainability through the development of a forward-looking model aimed at evaluating different scenarios of KETRACO’s financial performance varying the main drivers which affect the company: (i) revenue scheme, (ii) investment plan, (iii) funding sources and (iv) macro-economic conditions.
Figure 1 – Flow chart at a glance
The model and the whole project seeks to establish an optimal path for KETRACO to take over the debts currently borne by the Government of Kenya on its behalf. The year of acceptance of each of the existing borrowings and the eventual delay of different projects within the investment plan will determine KETRACO’s ability to bear debt and still be profitable.
Moreover, the project takes into account two additional variables: the evolution of final retail and transmission tariffs, and the level of exposure of the GoK to debt from the power sector. KETRACO’s remuneration needs to evolve to a fully cost-reflective scheme, but the costs of transferring all debt to KETRACO may impose a large burden on power consumers (currently that burden is borne by the government, so that the GoK is subsidizing final consumers).
Leveraging on a number of projects developed recently by MRC, focused on the optimization of the investment ad financing strategy of utilities across different countries, we have produced a corporate financial model easily modifiable to reflect different realities and environments, and allowing power utilities to keep timely monitored their financial performance and made relevant decisions in its investment and financing plan. Moreover, the corporate financial model encompasses a reporting module to facilitate the decision making process and creation of periodic updates.
Figure 2 – Sample of results
Capacity Building. MRC experts always keep training and knowledge transfers as a key priority in our projects. In this case, training courses on financial modelling and financial planning for utilities was provided to Ketraco staff in combination with hands-on work and case simulation in the financial tool itself.
Ketraco’s feedback: “we appreciate the wonderful support that we have received from the MRC Team and we look forward to such fruitful engagements in future.”
“From our side, once again many thanks to the MRC and World Bank teams for supporting KETRACO in this very key assignment. It was great pleasure working with MRC team and we really enjoyed all the sessions. Your keen interest to help our team during the 5 missions was quite inspiring and wonderful.”
For further information please contact Jose Maria Lopez (firstname.lastname@example.org).