Taskforce on power purchase deals combs files as probe heats up

Kenya Power under pressure to disclose the identity of Independent Power Producers.

In Summary

•At least 27 Independent Power Producers (IPPs) are being scrutinized by the 15-member taskforce appointed by President Uhuru Kenyatta on March 29.

It is expected to table a report in two months time as the government plots to put an end to the costly deals.

Industrial and Commercial Development Corporation chairman John Ngumi
Industrial and Commercial Development Corporation chairman John Ngumi
Image: /Enos Teche.

The taskforce probing power purchase agreements is scrutinising company files and signed deals, to establish the identity of the owners.

At least 27 Independent Power Producers (IPPs) are being probed by the 15-member taskforce appointed by President Uhuru Kenyatta on March 29, for a six-month period.

It is expected to table its report in two months as the government plans to put an end to the costly deals blamed for the high cost of power in the country, with some contracts running up to 2032.

“We are going through a whole pile of documents,” the taskforce’s chairman John Ngumi told the Star yesterday.

Ngumi who is also the Industrial and Commercial Development Corporation chairman said the team is working around the clock to deliver its findings within the set timelines.

“We are going along as planned,” he said, as Kenya Power remains under pressure to make public the owners of the IPPs.

Last week, the Public Investment Committee (PIC) of the National Assembly asked Kenya Power to table at least 17 Power Purchase Agreements (PPAs) signed with various firms.

Some of the companies pocketed about Sh50.2 billion in electricity sales to the utility firm in the financial year ending June 2020.

Kenya Power managing director Bernard Ngugi however cited confidentiality as the company remained adamant in disclosing the owners.

Even so,  Kenya Power has blamed the PPAs for its high costs, as it reported an after-tax loss of Sh2.98 billion in the year ended June 30, 202 , the first loss in almost 20 years.

During the period, non-fuel power purchase costs increased from Sh70.8 billion the previous year to Sh 74.4 billion, mainly on the depreciation of the shilling against major foreign currencies with the PPAs being in foreign currency.

Overall electricity purchase costs stood at about Sh82.1billion, accounting for over half of its operating costs.

“The current take-or-pay pricing model for Power Purchase Agreements factors in fixed capacity charges or deemed energy generation which have been unfavourable to our business in the absence of anticipated demand growth,” the firm says in its financials.

While KenGen’s hydropower can go for as low as Sh2.4 per kilowatt hour, with geothermal averaging Sh9 per kilowatt hour, according to the Energy and Petroleum Regulatory Authority data, some IPPs are charging Kenya Power up to Sh18 for a unit of electricity.

The government in April stopped the renewal of all PPAs with President Uhuru Kenyatta appointing a team to review existing deals.

Kenya Power has been paying for electricity generated, whether it is consumed or not, with the IPPs contributing to the country's high generating capacity of 2,800MW against a demand of 1,926.

According to Energy CS Charles Keter, expiring licenses of IPPs will not be renewed, as focus shifts to renewable energy to help cut the cost of electricity in the country.

Some of the companies facing the shut down are Tsavo Power’s (74MW) whose license expires this September and 60MW-Kipevu Diesel whose contract ends in July 2023.

Most of the IPPs rely on diesel-powered thermal turbines, which is costly in electricity generation.

The task force is expected to recommend a viable "pay-when-taken" (merchant plant) approach or any other viable payment structure.

It had called for public and stakeholder input last months, as it started to probe the country’s power deals.