alexa Statement by the Goverment of Kenya on the Reform of The Power Sector - Daily Nation

Statement by the Goverment of Kenya on the Reform of The Power Sector

Monday November 6 2000

The power sector in the country has for sometime been going through a very difficult period. Inadequate rainfall in the last two years and the slippage in the implementation schedule of some of the planned power projects have led to a shortage in the supply of electricity.

This has resulted in a programme of power rationing system in the country, since September 1999. Conservative estimates put the loss to the economy at approximately $68 million per month.

The Government has through the Energy Sector Reform Programme initiated policies and actions to restructure the power sector and to open it up to competition and private investment. As part of this programme the Government has separated the regulatory function from policy setting functions and generation functions from transmission and distribution functions. A milestone in this process was the completion in June 2000 of the separation of assets between KPLC and KenGen.

As a result of this reform programme Kenya is now host to three operative independent power producers with a combined generating capacity of 97MW while the fourth has commended the construction of a 75MW plant at Kipevu, Mombasa. There is now more investor interest in the sector then ever before.

To address the current power shortage in the country, the Government recently sought an Emergency Power Supply Credit of US$ 72 million from the World Bank. This credit will be used to contract the supply of 105MW of power, provide fuel for the plants and finance KenGen’s fuel requirements for its thermal plants. Out of this amount, 55MW are already being generated and an additional 50MW should be onstream by the end of October.

As has been stated in various Government policy documents such as the Interim Poverty Reduction Strategy Paper (IPRSP), the Government is committed to continued reform in the energy sector. The Government has stated its commitment to the restructuring and privatization of the power sector and to make the sector more efficient.

Advertisement

As part of this process, the Government in conjunction with the Board of Directors of Kenya Power and Lighting Company Limited (KPLC) will be taking steps to improve the operations and financial management of the Company. This process will be spearheaded by the Emergency Electricity Coordination Committee (EECC) which is comprised of the Minister of Finance, the Minister of Energy, the Permanent Secretary in the Office of the President and the Head of the Public Service, the Permanent Secretary in the Treasury, the Permanent Secretary Ministry of Energy, the Chairman of the Emergency Power Technical Team, and the Managing Director, KPLC.

The EECC has appointed a team to coordinate the activities associated with the restructuring of KPLC. This team is known as the Restructuring Task Force (RTF) and is made up of the following members; the Chairman of the Emergency Power Technical Team, representatives of the Ministry of Energy, the Ministry of Finance, KPLC and the Electricity Regulatory Board.

The first step in the restructuring process will be the appointment of management and financial consultants to review the organizational, management and financial structure of KPLC. The Consultant will be expected to make recommendations on how KPLC can be restructured to make it more efficient and what measures need to be put in place to reduce the operational cost of the Company.

The Consultants will review areas such; the management structure, the staffing levels, the skills base of the staff, the working capital management, the technical and non-technical losses and the prioritization of capital expenditure.

The Management Consultant is expected to have been contracted by November 3rd 2000 and the review completed by 4th December, 2000. The report is scheduled to be presented to the EECC and to the Board of KPLC by December 15, 2000 for approval. Once the KPLC Board approval is obtained, the restructuring will commence immediately.

The Financial Consultant will be appointed by November 30th, 2000 and the report submitted by January 31st 2001. This will be presented to the EECC and to the Board of KPLC by February 15th 2000 for approval and implementation thereafter.

Concurrent to the restructuring process at KPLC, the Government will also begin the process of the privatization of the power sector. As a first step, the Government will engage the services of a power consultant to review the power sector in Kenya and to make recommendations on the appropriate models for electricity transmission and distribution.

It is expected that the consultant will have been identified and signed up by January 31, 2001. The review is expected to be complete by May 31, 2001. The recommendations will then be presented to the Government and implementation will be carried out shortly thereafter.

Any measures which specifically relate to KPLC and KenGen will be sent to the respective Boards for approval. In the case of KPLC, relevant changes will be put before the shareholders at a general meeting for approval. The time frame given for the restructuring and privatization process is an indicative one and once the process begins the Government will speed up the process if at all possible.

Hon. Dr. F. Y. O. Masakhalia, EGH., M.P

MINISTER OF ENERGY