The recent Adani-KETRACO transmission line deal has stirred concern across Kenya.
This deal, intended to expand the national transmission network, has been met with public resistance and skepticism, as its pricing and scope present baffling financial questions.
As details of the agreement emerge, it appears that questions about transparency and feasibility must be answered, especially when considering the broader impacts on the cost of electricity for Kenyan consumers.
At its core, the deal entrusts Adani with constructing three major transmission lines.
These include the 96 km, 220kV Rongai-Keringet-Chemosit line, the 206 km, 400kV Gilgil-Thika-Malaa-Konza line, and the 70 km, 132kV Menengai-Ol Kalou-Rumuruti line, totaling 372 km of transmission lines at a staggering cost of KSh 96 billion.
Additionally, two substations will be built in Rongai and Thurdibuoro.
While the expansion of the national grid is crucial for development and meeting Kenya’s energy needs, the financial justification of this project is questionable, particularly in comparison with other projects KETRACO has overseen.
For instance, KETRACO’s 612 km, 500kV high-voltage direct current (HVDC) line linking Ethiopia and Kenya, completed in November 2022, cost USD 140 million (roughly KSh 18 billion).
The stark difference between this project and the Adani deal is evident, the Adani project is priced at a steep USD 737 million (KSh 96 billion) for only 372 km of transmission lines, which are lower in voltage specification.
The cost per kilometer in the Adani deal is thus extraordinarily high, raising concerns about inflationary pressures and a lack of cost control.
For context, the KETRACO Ethiopia-Kenya line’s cost per kilometer is around KSh 29 million, while Adani’s cost per kilometer is a staggering KSh 258 million.
Such an extraordinary markup cannot be attributed solely to inflation or minor variations in specifications, as regime defenders may argue.
To further put these figures in perspective, KETRACO’s total transmission network as of June 2023 spanned 5,476 km, with a historical cost (including ongoing projects) of KSh 205 billion, translating to an average cost of KSh 37 million per kilometer.
This network expansion has proven essential for Kenya’s development, but the cost per kilometer is far more aligned with industry norms.
By contrast, the Adani deal suggests a cost of KSh 258 million per kilometer, approximately seven times higher than KETRACO’s average historical cost per kilometer.
Such a dramatic escalation in expenses cannot easily be justified, and it raises serious doubts about the motivations and justifications behind this deal.
Moreover, KETRACO’s 2042 masterplan, which aims to add 11,131 km of new transmission lines at a projected cost of $4.778 billion (about KSh 621 billion at KSh 130 per USD), further highlights the disparity.
At the planned rate, this amounts to an average of KSh 56 million per kilometer, much lower than the per-kilometer cost under the Adani agreement.
If implemented prudently, KETRACO’s 2042 expansion plan would cost less per kilometer, making the Adani deal appear unsustainable in terms of both cost and efficiency.
Following criticism and public outrage, the initial quote from Adani was reduced from USD 1.014 billion in March 2024 to USD 737 million in August 2024 a 27% reduction amounting to KSh 36 billion.
This abrupt reduction raises red flags.
Cost reductions on such a massive scale cannot be easily dismissed as negotiation outcomes or mistakes.
This situation suggests a major inflation in the initial figures, casting doubt on the integrity and fairness of the financial planning process.
In addition to the construction costs, the operational cost implications of the Adani project are also significant.
KETRACO projects an annual revenue requirement of USD 164 million for Adani’s lines, translating to KSh 21.32 billion per year.
Over the 30-year contract duration, this figure sums up to KSh 640 billion, surpassing the KSh 621 billion estimated to cover KETRACO’s entire 11,131 km expansion plan until 2042.
This long-term financial burden could exacerbate electricity costs for Kenyan households and industries.Contrary to claims that this deal would reduce power tariffs, the additional transmission lines constitute only 6.8% of KETRACO’s existing 5,476 km network as of June 2023.
Despite KETRACO’s assertion that these new lines will reduce power losses and lower tariffs, a marginal 7% network increase is unlikely to have a noticeable impact on power costs.
KETRACO expanded its network by 3,438 km between 2019 and 2023 an increase of 59%. Yet, this significant expansion did not lead to any discernible reduction in electricity prices.
It remains unclear why the relatively modest addition of the Adani lines would have a different effect, especially given the high costs involved.
Critics argue that instead of delivering cost savings, the Adani deal could add approximately KSh 2 per unit to the cost of electricity, contradicting the president’s statement that the deal would lead to cheaper power.
In reality, the financial burden of this deal may be transferred to Kenyan consumers, raising electricity costs rather than reducing them.
This predicament raises valid concerns about the motivations behind the Adani-KETRACO deal and the overall transparency and fiscal prudence of Kenya’s energy policies.In summary, the Adani-KETRACO deal has sparked a strong reaction for its substantial cost and questionable long-term value for the Kenyan people.
The financial discrepancies, inflationary pressures, and the limited impact on power costs raise critical questions that warrant further scrutiny.
For a country striving to ensure sustainable and affordable power for its citizens, entering such costly agreements could undermine these goals, making this deal, as critics argue, a perplexing and potentially harmful move.
