Kenya Power & energy sector update
Reverse chronological order
Power sector status
Kenya’s electricity generation, demand, and consumption fell dramatically due to Covid 19 fallout, though it recovered slightly by July.
11 August Economist Intelligence Unit: Energy demand fell 8.1% (year on year decline) due to Covid 19 disruptions, and as a result power generation in Kenya has fallen considerably (7–9% compared to last year at this time) for three consecutive months. Consumption fell by 12.3% year on year in April and May. “Apart from signalling wider economic stress, lower demand is also hitting Kenya Power’s revenue and profits.” Independent power producers (IPPs) operating diesel plants were worst affected, not only by the Covid 19 demand drop but also by heavy rains leading to a surge in cheap hydropower generation, which “soared by 42% year on year” in April/May 2020. “Cuts imposed on the six thermal IPPs are disputed by operators, which view them as breaching their power purchase agreements, but Kenya Power has resorted to force majeure, which might give it legal protection.” (EIU predicts real GDP in Kenya will fall this year, though by less than 1%.)
3 August 2020 CEEMarketWatch: “Contraction of local electricity generation slows to 2% y/y in June” — “The contraction in local electricity generation (w/o emergency generated power) slowed further to 2.0% y/y in June from 7.5% in May and 8.7% in April, according to the latest leading economic indicators publication of KNBS. The development was largely driven by improved performance of geothermal and wind energy plants, which helped offset the slower y/y growth posted by the hydrogenation sector.”
CEEMarketWatch gives a good summary of general power sector status: “The govt has been investing heavily in the energy sector in an effort to boost capacity and increase the share of renewable sources but has remained on the spot over its inability to bring down the cost of electricity, allegedly driven by payments for idle capacity and losses due to the aged transmission infrastructure. Moreover, the country’s utility firm, Kenya Power, has consistently been demanding a tariff hike, maintaining it operates in the red over the past years. The govt last year acknowledged demand growth had been slower than planned, and unless the trend is changed, consumers should not expect sizable decline in costs. More recently it hinted it may agree to review the electricity tariffs as Kenya Power renewed its push for a 20% hike to cushion itself from the impact of the Covid crisis.”
28 July 2020 IHS Global Insight: “New leadership at Kenyan electricity distributor indicates implementation of new auctioning system for power producers before 2023” (also has a good summary of sector status)
Other energy-related news
13 August 2020: “Why US Climate Action Must Include Developing Countries” — “China’s investment in Kenya is emblematic: Kenya agreed to build a coal plant with China despite geothermal being cheaper and far less destructive; the project has been halted only by litigation, but if China can convince Kenya to build a coal plant despite their enormous and cheap renewable resources, imagine the quandary for developing countries with far less facile renewable access.”
9 August 2020: “Kenyans deserve lower electricity rates than Kenya Power charges” — opinion piece in The Standard by commentator David Karani. Given its abtural resources and available technologies, “there cannot be any compelling reason why Kenya should not pitch for most if not all of its entire power supply from green energy sources… Official policy should encourage a more sustainable approach with the necessary incentives that will work in favour of ordinary Kenyans instead of narrow business interests.”
6 August 2020 Business Daily: “Kenya Power gets external debt relief in cost cut push” — “Kenya Power Managing Director Bernard Ngugi said the utility company has secured a 12- month moratorium on the foreign loans and is in talks with local banks to reschedule its multibillion-shilling debt” from 14 foreign lenders… Kenya Power has already issued its third profit warning in a row, citing reduced electricity consumption due to coronavirus control measures and rising cost of buying wholesale power from firms like KenGen… Its net earnings will decline by at least 25% of last year’s profit of Sh262 million which was the worst in 16 years… He added that Kenya Power was also in talks with five commercial lenders to restructure its debt, which stood at Sh68.3 billion in June 2018.”
4 August 2020 Business Daily editorial: “Power utility firms should avoid costly trespass suits” — “The number of court fines slapped on Kenya Power and other public utility firms for trespassing on private land are becoming far too many and costly, adding unnecessary burden for the taxpayer.”
4 August 2020 Energy Monitor Worldwide: “Baharini Wind Power Project in Lamu, Kenya, Hit by a Major Setback” — “members of Lamu county assembly solidly passed a motion to invalidate the project over alleged failure to meet some required conditions… the project investor planned to resettle the Project Affected People to a land that is already demarcated, surveyed and titled, and this was against the condition to use an absolutely free land for that purpose… Furthermore… the investor had been directly involved in [and influenced] the resettlement plan” rather than allow it to be conducted independently.
“The plan was to put up 38 turbines on a 3,206 acres piece of land in Baharini village, Lamu West, approximately 40kms from the Lamu Port South Sudan Ethiopia Transport (Lapsset) Corridor project in Kililana. Upon completion, the project was expected to generate 90 megawatts of electricity which would be sold to Kenya Power & Lighting Company under a 20-year Power Purchase Agreement signed in February this year.”
“The Baharini Wind Power project is the second of its kind to be terminated on the same basis in the country after the proposed [90mw] Kinangop Wind Park. The latter was canceled in 2016 following fierce opposition from residents who claimed that they had been misled into signing oppressive contracts.”
Related 31 July Energy Mix Report: “Brakes slammed on Sh21 billion wind power plan for Kenyan region” — Bahari Ward MCA Anthony Njomo noted “He said the land on which the investor intends to resettle those affected by the project had already been demarcated, surveyed and titled and there was no free land for resettlement.”
2 August 2020 Daily Nation: “Kenya Power moves to cut off all illegal connections” (e.g. illegally connected electricity meter), it says in an effort to reduce losses by “cleaning its distribution infrastructure” and for public safety. Residents claim they have been paying, including 6000 households along Jogoo Road in Makongeni ni Nairobi. KPLC noted, despite the pandemic, it has not changed its normal policy on disconnections. Over 500,000 constomers had failed to pay their bills in April, May, and June, presumably due to the economic consequences of Covid response restricted mobility. According to CS Keter, payment defaults hit 3.9 billion KES (USD $39 million), and some of the defaulting customers were essential service providers such as water distributions and health facilities.
28 July 2020 Business Daily: “Kenya Power in talks for 20pc electricity bill hike” — “Kenya Power has opened talks with the energy regulator to increase electricity prices by up to a fifth after the State softened its earlier stand against higher tariffs.”
24 July 2020 CapitalFM: In consumer news, Kenya Power partnered with Safaricom to allow customers to pay for electricity through loyal “bonga points” accumulated through mobile phone usage, which providers consumers with an alternative source and contactless method to pay.
24 July 2020 Business Daily: “What awaits new Auditor General as she takes over” — Kenya Power will be amongst the state-controlled firms to be inspected and audited under the new Auditor General, Nancy Gathungu, as she tackles a backlog of financial statements that accumulated during a 10-month gap in transition from her predecessor, Edward Ouko.
23 July 2020 Business Daily: “Save Kenya Power from collapse” opinion — “The government, the majority shareholder of the electricity distribution monopoly Kenya Power, last week appointed a new set of independent directors.Looking at the composition of the new team, it is clear that an attempt was made to appoint people with knowledge and experience in the subject matter.”
23 July 2020 Reuters: “Keeping the lights on: solar power helps rural Kenyans during pandemic blackouts” — on reliance on residential solar systems
22 July 2020 press statement from African Energy Chamber via African Press Organization: “Kenya Power appoints African Energy Chamber’s East Africa President Eng. Elizabeth Rogo to its Board; Kenya Power is the most crucial fighter against energy poverty in the country”
15 July 2020 Daily Nation: “Half of Kenya Power directors quit” “Five non-executive directors of Kenya Power, representing half of the board, on Monday resigned without the electricity distributor announcing their replacement.”
15 July 2020 Daily Nation: from energy economist at Africa Utility Forum “Balancing cost-pricing component in electricity ecosystem inevitable” — “Africa has a unique opportunity to adopt a much less carbon-intensive development path as it pursues the use of modern energy technologies.”
14 July 2020 Capital FM: “Kenya: Five Kenya Power Independent Directors Resign” — “The board of directors of the Kenya Power and Lightning Company hereby announces the resignation of Adhil Khawaja, Kairo Thuo, Wilson Kimutai Mungung’ei Brenda Kokoi and Zipporah Kering as independent directors,” reads [the] Kenya Power notice.
14 July 2020 Standard: High operation costs and defaults deepen Kenya Power woes: “Kenya Power is staring at deeper financial problems as the coronavirus pandemic hits the firm’s bottom line from different fronts — reducing its earnings while pushing up its operational costs. The power distributor has experienced a sharp decline in revenues over the three months to June, following the reduction in demand for electricity… The firm has further been hit by high default rates among its consumers, who have been affected by Covid-19, and stopped paying their power bills.”
A 26 June 2020 opinion piece on the disconnect between Energy Secretary Keter and ordinary people: “Energy Cabinet Secretary Charles Keter this week urged households to consider using electricity to cook to rescue the profit-starved Kenya Power, because the demand for electricity has dropped since Covid-19 docked on our shores.”
(In response a letter to the editor notes the significance of non-revenue energy and uninstalled meters to potential consumers on the grid.)
Reports from 8 June 2020 that court cases including the KPLC graft scandal are stalled:
Older news for context
29 February 2020 — before the pandemic
27 February 2020
February 2019 from Director of Lake Turkana Wind Project
27 May 2018
