KCB Group will be the holding bank for payments ahead of the rollout of the Eastern Africa regional electricity trade, as the region inches closer to a shift that is expected to ensure cheaper power to consumers.
Sources who are part of the steering committee for the Eastern African Power Pool (EAPP) disclosed that the local lender was unanimously picked by the 13-member countries, based on a raft of factors including the cost of transactions.
KCB will hold the money deposited by the various countries and release it once a power sale transaction has been settled.
“The bank ticked a number of checklists like transaction costs and presence. The target is to have the market alive by September this year,” said the source.
This is the latest deal for KCB which also won a role in issuing letters of credit in Kenya's oil import deal. KCB, the country's biggest bank, has the National Treasury and the National Social Security Fund (NSSF) as its top shareholders.
Operationalisation of the EAPP will be timely for Kenya and other neighbours grappling with electricity generation hitches that have at times led to rationing of power. The trade will also ease reliance on the dirty and expensive thermal power plants.
Kenya has been forced to tap more electricity from Ethiopia to meet the rising demand without inflating customer bills as power from the horn of Africa economy is the third cheapest at Sh10.69 per kilowatt-hour (kWh) behind geothermal and locally-generated hydropower at Sh10.28 and Sh3.83 respectively.
EAPP is one of the five power pools in Africa meant to allow cross-border trade of electricity in a bid to shore up supply in countries grappling with generation deficits, lower use of thermal plants and reduce retail prices of electricity.
Market regulations for the EAPP have already been published with the member countries targeting to start the regional trade in September this year. The EAPP was first mooted in 2005.
Members of the EAPP include Kenya, Uganda, Ethiopia, Tanzania, Somalia, Libya, Congo DR, Djibouti, Rwanda, Sudan, Egypt and Burundi.
The countries are set to tap into the vast generation of cheap hydro-power in Ethiopia and Egypt.
Ethiopia is the leading country in hydro-power generation in Africa with 4.9 Gigawatts as at mid—last year followed by Egypt. Kenya is currently importing electricity from Ethiopia under a 27-year deal that started in 2022.
The EAPP will enable the 13 countries to trade under a Day Ahead Market (DAM) that allows for the locking of prices for the next 24 hours through an auction system, helping distributors (buyers) hedge against price fluctuations and trade electricity at a set price for the following day.
The other regional power trade pools on the continent are Southern Africa Power Pool, West African Power Pool and Central Africa Power Pool. The pools will allow countries to sell and buy electricity without relying on bilateral agreements.
Countries with excess power will submit price offers while those in deficit will table bids and ultimately impact on the final retail prices and also ensure a steady supply, helping countries to avoid blackouts tied to generation hitches.
Kenya recently completed the construction of high-voltage electricity transmission lines to evacuate power from Ethiopia, Uganda and Tanzania. The latest line is the 400-kilovolt line with Tanzania that was commissioned in December last year.
