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How high turnover at Kenya Power Board is stifling sector reforms

A view of Stima Plaza building in Parklands, Nairobi. [Edward Kiplimo, Standard]

The Kenya Power Board is set for an overhaul next month as the new administration takes charge of the electricity retailer.

The government, which is the majority shareholder in the company, is expected to unveil new directors who will be taking over a board that has not known stability over the last two years and, has suffered frequent exits.

The National Treasury has already communicated to the firm that it intends to remove the independent directors, including the current chair Vivienne Yeda, during the company’s Annual General Meeting (AGM) on December 16.

Ms Yeda has, however, indicated that she intends to quit the directorship of the firm in mid-December, according to Kenya Power’s notice calling shareholders for the AGM.

While her exit has been passed as voluntary, all indications are that she has been pushed out by the Treasury, which in a November 18 letter directed the Kenya Power board to draw up a special resolution for the removal of Yeda as a director.

“As a shareholder with 50.1 per cent in the Kenya Power and Lighting Company Plc, we require the board of directors of the company to table before the AGM an ordinary resolution for the removal of directors pursuant to Article 129 of the Company’s memorandum and articles of association,” said the CS Treasury Njuguna Ndung’u.

“The Special Notice is to be included in the agenda for the company’s 101st AGM to be held by December 31 and shall recommend the removal of Ms Yeda as a director of the company.”

A high turnover of board members has been the trend at the company over the last decade, where few independent directors have gone for one full term of three years, with nearly all of them getting kicked out of the board midway.

The last board that appears to have enjoyed a sense of 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 the independent directors as well as the chairpersons.

Yeda was appointed to the board as a director in July 2020 and later in December elected as the chair. She was appointed alongside four other directors, who are leaders in their respective industries, and at the time viewed as a dream team of sorts that would turn around the fortunes of the company, which appeared to be going down.

The other directors were Abulrazaq Ali, Elizabeth Rogo, Caroline Kittony-Waiyaki and Sachen Gudka. Alongside representatives from Treasury and the Energy ministry, the board was seen as formidable enough to turn around Kenya Power, a key cog for the country’s economy. The company had just reported a net loss of Sh939 million in the year to June 2020. Her two-and-a-half years at the helm of the utility company has, however, been marked by what could be described as a high-octane drama that has seen the board rub numerous parties the wrong way.

The result has been many dates with parliamentary committees where it has defended its actions and, at one time, having to record statements with the Ethics and Anti Corruption Commission (EACC) over claims of procurement malpractices.

During the period, Kenya Power has also emerged from loss-making, with credit perhaps partly due to the board. It made a net profit of Sh3.5 billion in the year to June 2022, up from Sh1.5 billion in 2021 and Sh939 million loss in 2020.

The company, however, still remains in a precarious position with negative working capital, according to the latest results for the year to June 2022, with liabilities of Sh110.43 billion exceeding its current assets at Sh54.69 billion.

Numerous exits

Between 2020 and now, the board has experienced numerous exits, with nearly all the directors that were appointed at the same time as Yeda having left. Following the resignation of the directors, Kenya Power said they were pursuing other interests. There have, however, been mumblings that differences of opinion within the board as well as with the Treasury and Energy ministry may have at some point split the directors, with some opting to quit.

The replacements to the board, some of them made as recent as August this year, might be on their way out going by National Treasury’s stand on the removal of directors despite having offered themselves for re-election during the company’s AGM.

Sarah Mbwaya and Brigadier (Rtd) James Gitiba were appointed as directors on July 26, while former chief justice Aaron Ringera was appointed as director on August 24.

With a majority stake, the government will easily have its way as to who sits on the board of the company.

Other than Yeda, another director who has also decided to call it quits is Yida Kemoli, who, according to the AGM notice, will not offer himself for re-election during the shareholder meeting.

In addition to the movements at the board, Kenya Power has also gone more than a year now without a substantive boss, which has now seen the auditor general raise concerns on the delay in hiring a new chief executive officer. Other than overseeing the day-to-day running of the business, the chief executive also sits on the board of directors.

Bernard Ngugi quit in August last year before the end of his contract and the company has delayed naming his replacement. This has been despite hiring a consultancy that went through the process of searching for a new chief executive. Following the exit of Ngugi, the company named Eng Rosemary Oduor as interim boss. In May this year, the firm replaced Oduor with Eng Geoffrey Muli, also in an acting capacity.

Kenya Power hired a consultant in January this year to undertake the recruitment of a new chief executive. The consultant – Deloitte – handed its report on the process to the board, including the recommended candidates.

The Auditor General, in a report auditing Kenya Power’s financials for the year to June 2022, warned the exercise may not have been worth the resources since the company is yet to appoint a new chief executive.

“The company procured the consultancy for the provision of executive recruitment services of the managing director to Deloitte Consulting Limited through a contract signed on January 27, 2022,” said the auditor general in the report that is set to accompany Kenya Power’s annual report for the last financial year.

“The consultant on May 6, indicated that it had concluded the recruitment process and presented the results of screening, final interview and recommended candidates to the chairperson of the board of directors. The contractor was paid the full contract price of Sh2.99 million,” it said.

“However, no documentary evidence including reports of the consultant, evaluation results, recommendation of the consultant and board minutes and resolutions on the matter were provided for audit review. Further, there are no explanations were provided on why an appointment of acting managing director was yet to be done. The expenditure may have been wasteful since the position is yet to be filled.”

Other than putting at risk the turnaround plan that was aimed at puling Kenya Power out of the financial difficulties, lack of stability at the board has compromised electricity sector reforms, with the company being at the core of these reforms.

The sector reforms were informed by the Presidential Task Force on Power Purchase Agreements (PPAs), which made a raft of recommendations including the 30 per cent cut on electricity that was never fully effected, with the 15 per cent that was implemented in January 2022 already wiped by increases in power costs seen in the course of the year.

The task force had recommended an overhaul of Kenya Power’s procurement processes as well as a re-look at how it engages IPPs. The company was also expected to transfer to other state agencies some of its roles that were seen to be in conflict with its core job of power retail and distribution. This included the operation of the national control centre.