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KenGen in plans to sell power directly to large consumers

BUSINESS
By Macharia Kamau | March 7th 2017
KenGen Managing Director Albert Mugo (right) welcomes former chairman Titus Mbathi to yesterday’s investors’ briefing. Looking on (centre) is KenGen chairman Joshua Choge. [photo: courtesy]

Kenya Electricity Generating Company (KenGen) is in plans to supply electricity directly to consumers.

The move aims to cushion KenGen from risks associated with the current single buyer model where Kenya Power buys all the power generated in the country for resale to retail consumers.

The firm said it was awaiting the enactment of Energy Bill, currently in Parliament, before it comes up with a concrete plan on how to go about talking directly to customers.

The Bill has provisions for more players in the wholesale and retail electricity market, giving KenGen an option to sell bulk energy to multiple customers.

Competition

The move is likely to see Kenya Power start getting competition in servicing the lucrative bulk market. Currently, KenGen’s role is limited to production of electricity.

As though to reassure Kenya Power, KenGen chief executive Albert Mugo said the firm would only target new large consumers of electricity and keep off from clients already signed up by the power utility company.

“The Energy Bill has provisions that will enable us to supply power directly to large consumers. We are looking at large consumers that are close to our generating facilities who we can connect with electricity without incurring distribution and transmission costs,” he said.

KenGen is particularly keen on firms that will be operating at its planned industrial park in Olkaria, Naivasha.

Eng Mugo, who spoke at an investor briefing in Nairobi yesterday, said the firm would still continue supplying Kenya Power for distribution to its more than five million customers as per the existing contracts that are in place.

“We will continue selling to Kenya Power... we have contracts and we will get into new contracts. What we are looking at are new and large customers,” he said. During the briefing, Mugo told investors that KenGen expects to post better performance over the second-half of the 2016/17 financial year. KenGen’s profits declined during the first half to December 2016, reporting a 17 per cent drop in profit after tax during the period.

KenGen’s profit after tax declined to Sh4.6 billion in the six months, compared to Sh5.6 billion over a similar period in 2015.

This was on account of shutting down of its diesel generators in Garissa and Lamu, following the completion of a transmission line connecting the two counties to cheaper hydroelectricity. Additionally, non-traditional revenue streams – sale of geothermal steam and commercial drill – performed dismally due to technical hitches and low demand.

According to Mugo, the results were impacted by the decommissioning of Garissa, Lamu and Embakasi Gas Turbine Thermal power plants and pending receipt of revenue from commercial drilling services.

“Although the decommissioned plants reduced our revenues in this interim period, we expect to deepen use of renewable energy in the grid to the benefit of electricity customers and new industrial investors since these power plants used expensive fuel to run. This has no doubt helped the country manage the use of thermal power plants during this period of drought,” he said.

KenGen also expects to begin construction of Olkaria V geothermal power station by end of March this year.

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