State mulls new Kenya Power unit amid board shakeup plan

Kenya Power Engineers install a transformer in Kiriguri village, Manyatta Constituency of Embu County on November 9, 2023. [Murithi Mugo, Standard]

A new energy service company will be established by the government within Kenya Power to complement the struggling electricity distribution firm.

The move signifies a new chapter in the distribution of electricity in the country at a time when the troubled utility is facing a radical board shakeup. The creation of a Super Energy Service Company (Super-ESCO) within the utility is being financed by the African Development Bank (AfDB).

It is part of comprehensive reforms introduced by the Kenya Kwanza administration.

The reform and restructuring of Kenya Power, along with other inefficient and bloated State agencies, is a crucial requirement set by Kenya’s major multilateral lenders, including the International Monetary Fund (IMF), the World Bank, and the AfDB, in order to receive bailout funds amounting to billions of shillings.

Kenya Power believes that the addition of the new unit will improve energy efficiency and allow for the provision of new services and revenue streams, thereby reducing the need for State bailout. 

“KPLC management focus has shifted towards restructuring the company, sealing loopholes in revenue collection, and exploring avenues for more revenue generation while continuing to develop its initiatives in the energy efficiency and climate change fields, where it intends to become a key player,” it said yesterday.

“Against this context, the AfDB’s Sustainable Energy Fund for Africa is providing a Technical Assistant grant to KPLC to structure and build the capacity of a team to operate as a Super Energy Service Company (Super-ESCO) in Kenya.”

Kenya Power, facing financial difficulties and increasing debt, is facing demands from manufacturers to provide dependable and cost-effective electricity to businesses.

  The occurrence of frequent power outages caused by inadequate supply and obsolete infrastructure has compelled firms and affluent customers to invest in backup generators. 

In addition to addressing its substantial debt, Kenya Power believes that the implementation of the proposed unit will enable it to secure fresh funding from diverse sources, including the international credit market. 

“The launch of this project is scheduled to start in March 2024 for an estimated duration of 24 months. Operationalisation support should consolidate Super ESCO’s ability to engage and manage large volumes of projects nationwide,” said Kenya Power.

As part of the ongoing reforms within Kenya Power, the State is implementing a restructuring of the company’s board. This move aims to reduce control and separate the company’s development initiatives, allowing it to operate based on commercial principles.

Yesterday, Kenya Power announced that it has selected the audit firm Deloitte to assist in this process. 

The firm’s shareholders on November 10 approved amendments to the company’s memorandum and articles of association, which gives minority shareholders four slots in the board while reducing the government’s slots to five.

Shareholders are required to submit their nominees who will fight for the four director slots by today, Friday, November 24 at 11.00am.

“Following the approval, four directors will be elected by private shareholders (minority shareholders) while the other five directors will be appointed by the National Treasury (majority shareholder),” said Kenya Power.

“Kenya Power has hired Deloitte & Touche LLP to lead the process of onboarding independent directors to the Board… (the firm) will oversee the nomination and election of the independent directors to give assurance on the integrity of the process and provide the required support to the Board of Directors.”

It said the board changes will reflect the shareholding of the firm and also safeguard the interests of both minority and majority shareholders.  Kenya Power has initiated plans to transfer assets worth billions of shillings to Kenya Electricity Transmission Company (Ketraco). The Cabinet approved this plan in May.

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