REFORMS

We are not at war with IPPs, Kenya Power chair says

The government is re-negotiating contract terms with the independent producers.

In Summary

•The Presidential Taskforce on Review of Power Purchase Agreements recommended negotiations with IPPs to secure an immediate reduction in power purchase tariffs.

•Energy CS Monica Juma is confident that the cost of electricity will drop by 33 per cent before Christmas, as the government renegotiates power purchase deals.

Kenya Power board chairman Vivienne Yeda and Kenya Power acting managing director and CEO Rosemary Oduor, during the company's 100th AGM held on Friday/HANDOUT
Kenya Power board chairman Vivienne Yeda and Kenya Power acting managing director and CEO Rosemary Oduor, during the company's 100th AGM held on Friday/HANDOUT

Kenya Power is a willing partner to Independent Power Producers (IPPs) who endeavor to provide to Kenyans affordable and reliable power, board chair Vivienne Yeda has said.

This, even as she affirms reforms recommended by the Presidential Taskforce on Review of Power Purchase Agreements will be fully implemented.

This includes re-negotiation of contracts with IPPs.

Formed in March, the Presidential taskforce which gave its report in September recommended for a review and renegotiations with IPPs to secure an immediate reduction in Power Purchase Agreements (PPA) tariffs.

It called for the cancellation, with immediate effect, of all pending negotiations of PPAs and ensuring future agreements are aligned to the “Least Cost Power Development Plan”.

The taskforce was formed on the recommendation of the Kenya Power board which took office last year.

This was after a review of among other things, KPLC’s financial position and prospects.

The board, then, concluded that the company’s future was imperiled both by the terms of existing PPAs with IPPs, and by the pipeline of potential PPAs that were then under consideration.

Last month, Energy CS Monica Juma announced strict implementation of recommendations by the task force, even as she invited IPPs to the negotiation table.

Yesterday, Yeda said the board is fully aligned with the Cabinet Secretary’s position.

“As we implement these recommendations, let me make it clear that KPLC is not at war with IPPs,” she said.

She was speaking during the company’s 100th Annual General Meeting, held virtually.

“It would be a pity if IPPs did not take up this invitation, but it will not stop your company’s determination to see that we arrive at a fair, win-win position in so far as PPA terms are concerned,” Yeda said.

She said KPLC is keenly aware of the unsustainability of the terms and conditions of the existing PPA agreements.

Yeda said Kenyans are punished by the ever-increasing cost of electricity including energy from their own natural resources including geothermal, wind and solar.

“Is it not a shame that in these 100 years, despite all these resources, Kenyans do not have access to affordable clean energy?,” Yeda posed, “Expensive energy that is not affordable is not accessible.”

In the current framework, IPPs continue to record stellar profits and dividends while Kenya Power, the sole off-taker, and the wananchi struggle to make ends meet, she said.

“Even the global Covid pandemic was not reason enough to review the terms of PPAs. The IPPs dollar and Euro denominated PPAs, with very high IRR and ROE, present an ever-increasing liability as the Kenya shilling continues to depreciate and the FX risk is borne by wananchi through pass-throughs in the tariff,” Yeda said.

Some IPPs have been selling electricity up to 25 times more than the cheapest power producer–Kenya Electricity Generating Company(KenGen), which has been giving Kenya Power a unit at Sh5.48.

The recently formed Electricity Sector Association of Kenya (ESAK, a lobby group for IPPs and private players in the energy sector, says tariffs charged by power projects must ensure that the project can cover both operational and finance costs.

Meanwhile, Kenya Power management continues with its turnaround strategy, which saw it bounce back to profitability, reporting a Sh1.5 billion in net earnings for the year ended June 30.

Profit before tax of was Sh8.2 billion.

This was a turnaround from a Sh939 million loss last year.

The turnaround strategy is premised on five key focus areas namely improving customers’ experience at every single touchpoint of the business, growing sales by connecting new customers, and increasing uptake among existing ones.

Management is also keen to enhance revenue collection by improving billing efficiency, and enhancing field presence, improving system efficiency to address losses, and prudent management of costs, acting managing director and CEO Rosemary Oduor said.