‘Win-Win Solutions,’: Energy CS Juma Calls On IPPs To Renegotiate Energy Agreement

NAIROBI,Kenya, Nov, 17 – Energy Cabinet Secretary Amb. Dr. Monica Juma has revealed that stakeholders in the energy sector are well in course to ensure that recommendations by a presidential task force to ensure the price of electricity in the country is lowered has been fulfilled.

Juma while meeting stakeholders said that renegotiations of Power Purchase Agreements (PPAs) are not unique to Kenya and that the goal remains to seek an equitable situation where investment responds to the needs of the country.

“This administration is keen to engage with this process in an orderly and structured manner.  I want at this point to note and thank the Independent Power Producers that have already approached me and expressed their readiness to engage. I welcome their demonstration of good faith,” said Juma.

The CS further called on the Independent Power producers (IPPs) to come forward to the negotiating table and engage towards,”win– win solutions,” that would secure a sustainable energy sector in the country.

“We realize that as a vanguard nation, in the renewable energy Kenya has a historic duty to lead in terms of helping to develop appropriate and just framework for future investment in this fast growing sector.Of course the Government has a rapporteur of tools that it can invoke but my preference is to seek solutions that nurture partnerships that are responsive to the needs of Kenyans and our development aspirations,”

The IPPS have been encourage to formally write to the Ministry of Energy through the Principal Secretary expressing their interest formally by November,19,2021.

“After the engagement, this team will offer guidance on the way forward.  I am elaborating this procedure in the interest of transparency but more importantly to avoid confusion, brokerage or forum shopping around the process,” she said

KPLC On The Spot

A multi-agency team comprising of the DCI, Financial Reporting Center (FRC), Assets Recovery Authority and other investigative agencies will be assembled to investigate alarming system losses within KPLC, procurement practices, insider trading, conflict of interests and suspect transactions involving KPLC staff and others, he said.

For a while, KPLC has been running at a loss, with all indicators pointing to ineffective Power Purchase Agreements (PPAs) that have left the company heavily indebted while ironically paying for excesses energy it does not need in take-or-pay arrangements blamed on poor negotiations and vested interests.

Besides high fixed capacity charges amounting to Kshs. 47 billion, the PPAs are bound by Commercial Operation Dates (CODs) that are not aligned with the company’s power demand. This has often resulted in excess power generation even when the demand is low.

In the 2019/2020 Financial year, KPLC posted a loss before tax of Sh7 billion. Its negative working capital position for the fourth consecutive year has also raised substantial doubt about its ability to sustain operations.

The system losses stood at 23.47 percent, exceeding the 19.99 percent limit approved by the Energy and Petroleum Authority (EPRA). This is attributed to a lack of internal control measures put in place to mitigate losses including governance.