Inside Gov’t plan to reduce losses and save Kenya Power

The ministries of Energy and the National Treasury have been instructed to work with energy sector companies to implement a turnaround strategy to save Kenya Power from the current financial challenges.

Kenya Power is expected to sell some of its assets to the Kenya Electricity Transmission Company (KETRACO) and restructure how its directors are appointed.

The utility firm, despite its monotony, has been recording reduced profitability over the last seven years.

It’s financial stability is now in question as it has been unable to meet its cash obligations for several years.

To turn around the trend, Energy and National Treasury Cabinet Secretaries wrote a Cabinet memo that was signed off by the Attorney General to transfer the transmission lines assets it currently owns to KETRACO.

The lines are valued at Ksh.20.2 billion, but are to be sold to KETRACO at market value, likely to be higher.

The government will facilitate KETRACO’s procurement but will be netted off from loans to Kenya Power.

KETRACO is also expected to buy transmission lines owned by power generating company KenGen at a cost of Ksh.5.3 billion.

Kenya Power, the ministries of Energy and National Treasury, as well as KETRACO are required to develop and implement a turnaround strategy that will see system losses incurred by the power distributor reduced by 8 percentage points.

At the moment, government and the private sector control Kenya Power shareholding at almost equal basis with a slight advantage to the government.

However, the government has over the years been appointing all directors of the Kenya Power board.

The Cabinet on Tuesday approved restructuring of the appointments to have both government and private investors appoint a number of directors proportionate to the shareholding.

As such, Kenya Power has been required to call a special general meeting to review the articles and memorandum of association.

Once the reforms are implemented, it is expected that the debts owed to suppliers will reduce by Ksh.19 billion, and that outstanding loans will reduce by Ksh.20 billion, while assets owned by Kenya Power will reduce to Ksh.255 billion.

At the moment, Kenya Power has a negative working capital or operating liquidity of Ksh.55.7 billion. It has been negative since 2016, meaning the company is unable to meet its short-term obligations.

Part of Kenya Power’s troubles intensified in January 2022 when the then president Uhuru Kenyatta imposed a tariff reduction of 15 per cent.

This occasioned revenue shortfall of Ksh.26.3 billion up until March 2023; the government is yet to pay Ksh.15.43 billion in compensation.