Why Kenya's power sector is in a full time crisis mode

There is no guarantee, it seems when serving on the board or management team of Kenya Power.

This is true at least over the past few years, with officials serving both in senior management and as directors experiencing a high turnover.

Over the last decade, few independent directors have gone for a full-term of three years, with nearly all of them exiting the board midway.

The last board that appears to have enjoyed some stability was chaired by Eliazar Ochola who left in 2014. Since then, the board, just as has been the case with management, has experienced a high rate of turnover for both independent directors as well as chairpersons.

But perhaps the board that has had the most colour and hogged the most limelight is the current one chaired by Vivienne Yeda.

Since the appointment of Ms Yeda in July 2020, alongside another four directors - after the exit of yet another four independent directors under unclear circumstances, the board has made headlines for various reasons.

These have ranged from accusations of usurping the role of management and running the show at Kenya Power while relegating the senior managers to bystanders to allegations of procurement malpractice.

Procurement malpractices

The board has severally been summoned by Parliament’s Committee on Energy. Its members at some point recorded statements with the Ethics and Anti-Corruption Commission (EACC) over claims of procurement malpractices at the power distributor.

The board has also made headlines following actions that were to the delight of consumers. Such includes when it announced it would shelve the push for a tariff hike and would instead work on internal processes to generate savings.

In last week’s board exits, three independent directors - Eng Elizabeth Rogo, Eng Abdulrazaq Ali and Dr Caroline Kittony-Waiyaki – quit Kenya Power’s board and in a statement, the firm said they were pursuing other personal interests.

This had come just days after the company replaced Eng Rosemary Oduor as acting Managing Director and in her place appointed Eng Geoffrey Wasua Muli, also in an acting capacity. Counting the interim CEOs, the firm has had five chief executives over the last four years.

The company has not had a substantive boss for most of this time and according to the union, projected the firm as shaky.

According to an insider, the board members are torn between two centres of power, with the Energy Ministry on one side and the Cabinet sub-committee on Kenya Power formed to oversee reforms at the entity led by Interior and Coordination Cabinet Secretary Dr Fred Matiang’i on the other.

The Ministry and the Cabinet committee should be pulling in the same direction and if anything, the Energy CS is a member of the committee.

The source, however, said the board members of Kenya Power appear to have been getting different briefs and aligning themselves with one or the other.

There are also claims of the breakdown of communication between the board and the Energy Ministry on critical matters including the appointment of management.

“In the case of replacing Oduor as the acting managing director, the Ministry was in the process of finding out what was going on only to find out that communication had been sent to the Capital Markets Authority. It was the same case with the resignation of Bernard Ngugi last year as chief executive. The ministry was finding out as communication was being sent to the capital markets regulator,” said the source.

“There was a meeting and within an hour, she had been forced out and communication made to the market regulator before the ministry could figure out what was happening.”

The frequent exits and new appointments at both the board and management levels is of concern to the Kenya Electrical Trades and Allied Workers Union (Ketawu). The union noted that the Energy Ministry needed to restore order at the power firm as the current situation has left employees in a state where they are not giving their best.

“Kenya Power workers are totally demoralised because of high turnover of CEOs and the board that has impeded the implementation of staff welfare matters. We call for the speedy appointment of a local substantive MD and CEO,” said Ernest Nadome, Ketawu National General Secretary.

“Sober and functional boards bring stability but it has been two years of near-paralysis at Kenya Power.”

The latest exits from the board leave Mr Kairo Thuo, Yida Kemoli together with Ms Yeda as the independent directors, with the other board members representing government interest in the power firm.

Interestingly, Thuo was among the five directors who were shown the door in the July 2020 purge and paved the way for the appointment of the directors who have now left the firm’s board.

He made a comeback in November of the same year, where the company notes that he was “elected to the board on November 13, 2020”.

Independent directors

Mr Kemoli was also elected as a director in November last year.

Following the July 2020 appointment of the new independent directors, the board has had a busy but also rough two years as it sort to turnaround the power company that reported a loss of Sh939 million for the year to June 2020.While the firm has returned to profitability and reported Sh1.49 billion after-tax profit for the year to June 2021, it still reported negative working capital.

The board has recently taken up the implementation of the recommendations of the Presidential Taskforce on Review of Power Purchase Agreements (PPAs). These recommendations, whose implementation is a matter of a presidential directive issued last November, are also at risk.

The taskforce recommended a 30 per cent reduction in the cost of power, informed by reforms both within Kenya Power as well as the sector.

The recommendations also included renegotiation of PPAs that Kenya Power has signed with independent power producers, a process that is steered by both the firm and the Energy Ministry.

These have so far yielded a 15 per cent reduction in the cost of power. Another tranche of 15 per cent reduction had been promised by end of March this year but is yet to be delivered.

Other far-reaching recommendations across the sector, including the transfer of assets and functions across different government power sector agencies, could also be at risk of being concluded.

Over the two years since the appointment of the independent directors who are now leaving, the board has had major running-ins with different stakeholders. MPs have accused it of sidelining management and running Kenya Power’s day-to-day activities going by the high number of meetings that it had in the year to June last year.

The board and its committees held a total of 98 meetings, according to Kenya Power’s annual report, which included 28 full board meetings and another 29 meetings by its committee on strategy and innovation. This is in comparison to 14 full board meetings held in the previous year and a total of 30 meetings by both the board and its committees.

Hindpal Jabbal, who has had over 50 years of experience working in the country’s power sector and is Epra’s (energy regulator - then ERC) founding chair, noted that the challenge with not just Kenya Power but the country’s electricity sector is its institutional set up that predisposes it to failure.

He said with the Ministry to an extent playing a role in overseeing the running of Kenya Power as well as its regulation, there was a huge conflict that is bound to cause friction and at times neglect.

He noted for the sector to operate sustainably, there was the need to separate power, especially between those of the appointing authority and the regulator.

“The appointing agency – or the Ministry – is the same as the supervising agency and the same time sits on the board of Kenya Power. The PS also sits on the boards of other agencies, including Epra, which is the regulator and approves or rejects requests from KPLC, including tariff increases,” he said.

“The PS sits in the board meetings of the different power sector agencies, where the board members are also appointed by the Ministry. They direct power planning, decide what projects should be brought in and even negotiate Power Purchase Agreements (PPAs). Some of these roles are conflicting – for instance overseeing the negotiation of a PPA as a director of KPLC and having to approve or reject the same PPA as a director of Epra.”