Kenya Power strikes Sh200m deal with suspended bosses
By Macharia Kamau and Jacob Ngetich | September 17th 2019
Suspended Kenya Power managers have walked away with millions of shillings in “severance” pay to relinquish their positions at the electricity retailer.
The move is meant to pave way for the recruitment of a substantive management team even as the court cases in which they face corruption charges continue.
The managers, including former chief executive Ken Tarus, will walk away with a combined Sh200 million in what has been termed a mutual separation, with each pocketing between Sh15 million and Sh20 million.
Kenya Power’s entire C-Suite was July last year arrested and charged with different corruption charges and subsequently suspended.
The pay-off was deemed necessary, according to a senior Ministry of Energy official, as the power utility firm bosses had only stepped aside and not quit.
This meant that they still had their contracts and termination could have been costly as the court cases had not been concluded or found them guilty.
This might have meant lengthy litigation against Kenya Power, according to the official.
The power firm, which had appointed 13 new managers in an interim capacity, has been looking for ways to get rid of the embattled team and recruit a fresh one, but its hands have been tied.
This was also because the old team had only been suspended, and none of them was willing to quit and pave the way for the hiring of a new team.
Energy Cabinet Secretary Charles Keter on Friday told Financial Standard that the former managers had reached a mutual separation agreement with the company’s board that paved way for the firm to start recruiting a new team, starting with the new chief executive.
The board had proposed a mutual separation and through an agreement and a pay-off to have the suspended employees exit. This would enable the firm to hire their replacement even though it might be an expensive affair.
A source said the separation would see the company part with Sh200 million in what would be the severance pay to the managers. A Kenya Power insider said each of the managers walked away with between Sh15 million and Sh20 million. The interim team has been getting renewals of their terms every few months.
In the deal, former chief executive Tarus will come off as a major winner, pocketing Sh20 million, according to sources.
This would have been his salary for two years, having been paid Sh11 million in salary and allowances during his first year as chief executive between August 2017 and July 2018, when he was suspended following his arrest and arraignment in court.
He had been on half-pay over the 2018/2019 financial year during which he remained suspended.
He was appointed chief executive on August 1, 2017, on a three-year contract, which would have meant that his term would have come to an end in August 2020. The ministry official told Financial Standard that the decision to pay off Tarus, as well as the other officials, was informed by the need to have a substantive management team in place at the company, which is a critical player in the power sector.
“The board’s argument was that it is not in the best interest of the company to have people acting for a long period of time, with the current team having been in an acting capacity for over a year. It is uncertain how long the court case would take,” said the official.
Tarus and his managers were charged with conspiring to commit an economic crime and abuse of office.
This followed the acquisition of electricity transformers that turned out to be faulty and ended up lying idle at one of the firm’s yards.
In spite of the more than the 300 transformers coming with warranties, the supplier did not replace them, although they had received full payment and Kenya Power instead tried to repair them.
Three directors from Muwa Trading Company, the company that supplied the faulty transformers, were also charged.
The power utility company in August started the search for a new chief executive with interested candidates having been expected to submit applications to business advisory firm Deloitte, which has been contracted to undertake the selection process, by the September 6 deadline.
Among those that have applied for the job include the acting chief executive Jared Othieno as well as some of the general and regional managers also serving in an acting capacity under Othieno.
“The board wants to first get the managing director in place then after that start recruitment of the general managers with the help of the chief executive,” said the Kenya Power official.
Secrets of the wealthy
- Ketraco, Kenya Power haggle over Sh39m costs of blackout
- How jobless engineer found success in property
- SBM Bank gives solar firm Sh1.6 billion loan
- Loan defaults dip to lowest in 19 months
- East Africa council pushes for seamless trade