The national electric power provider, Ethiopian Electric Power (EEP), said it is having trouble paying its loans due to the current higher currency depreciation of the Ethiopian birr.
Moges Mekonen, Public Relations Manager of EEP told Addis Zeybe that one USD is currently about 53 ETB, and is worth more than 100 ETB on the black market. At the time the firm received the loan, the exchange rate was between 18 and 20 ETB.
“The Commercial Bank of Ethiopia and lenders overseas were the two sources of loans to whom the electric enterprise owes. Returning local debt is simple, but doing so with foreign currency is dependent on the exchange rate's value, which changes frequently,” Moges explains.
Most of EEP’s investment is undertaken using foreign currency obtained from major sources of loans and grants.
In the month of September, the gap between the Ethiopian currency’s official and black market exchange rates widened to reach 100 ETB and more.
Regardless of the currency depreciation or continuing fall of the purchasing value of the Ethiopian birr, paying the debt including the interest became inevitable. “Currently, the pressure it creates as an institution is a concern. paying the loan at this moment has become a headache for the company,” according to the PR Manager.
Moges added that the exchange rate per USD during the taking out of the loan and payment due time is not comparable. It raised from 12 ETB to 53 ETB within a couple of years.
What EEP sets as an immediate solution to contain the financial crisis it faces is to sell electricity to foreign nations, particularly those where foreign currency is accessible in order to raise the institution's revenue.
The majority of the electric corporation’s expenses, including the power plants, transmission lines, and substations, are incurred in US dollars.
Ethiopian Electric Power is unable to make a profit, let alone cover its own expenses, as a result of the accumulated debt and the strain it has imposed. It is also unable to undertake significant projects without borrowing money.
“The institution's returns or investment results are long-term returns,” said Moges.
The government has been able to cancel the loan of around 198 billion ETB or half of the existing loan and allowed EEP to turn it into its own resources in order to alleviate this pressure.
Even though the PR officer could not reveal the exact amount of the loan during the interview, he said that he needs to refer to documents to disclose the total loan of the company.
Experts suggest raising electricity prices is a way to increase the company's income. Responding to Addis Zeybe’s question about whether EEP plans to increase service fees, the Public Relations Manager said this is not considered an immediate solution as a price study with stakeholder participation would need to be conducted to determine how much to raise.
“This decision is not solely of Ethiopian Electric Power. As the members of EEP’s board of management are the heads of ministry offices which are determinants of country's macroeconomic activities, so it will be resolved based on the decision of these sectors.”
The issue has been brought to the attention of the management board of the institute.
Ethiopian Electric Power has announced that it eyes new investment projects for the fiscal year of 2022/23 including the construction of transmission lines and substations.
Addis Zeybe also learned that after two months the national electric power corporation has a plan to start export of electric power to neighboring Kenya.