Kenya Electricity Generating Company’s (KenGen) last week announcement that it had more than doubled its net profit to Sh18.38 billion for the full year ending June 2020, has shed the light on the power value chain where the producer is making huge profits while the distributor is sinking in financial abyss.
The energy generator’s 133 per cent jump in earnings is hard to compare with its key partner in the business; Kenya power, the only buyer of its product.
The two have their profitability graphs facing different directions despite having their fates tied in the supplier-distributor relationship, a very strange one. So strange that Kenya Power is expected to make a Sh2.98 billion loss official anytime this quarter after the figures emerged in documents submitted to the National Treasury while KenGen maintains a Sh21 billion gap in net earnings between it and its only distributor. How?
That remains the puzzle whose explanation according to experts is found in the operations within the two power parastatals, skewed power purchase deals and the market inefficiencies that have resulted to the puzzling power value chain where the producer is far richer than the distributor who should essentially be making the money like it happens in most value chains.
Analysts contend the power distributor may have had a fair share of their internal inefficiencies coupled with years of government policies that have pushed power distribution towards social and political realms than business while keeping generation a pure business.
An energy expert who spoke to Smart Business seeking anonymity places the woes for Kenya Power squarely on government policies largely bordering on politics.
"It is political and the Last Mile Project is an example. KenGen is doing fine because there is no political interference and KenGen has to meet all costs through borrowing largely through donor agencies or through their own earnings. Kenya power has had to borrow even from local banks to take care of the burdens brought about by the last mile consumers," the expert who headed the energy regulator before retiring told Smart Business.
The government has, however, defended the plan to connect all households to power as a fully funded scheme where Kenya power is compensated even as the State’s remittances to Kenya power under the Rural Electrification Scheme have been lagging more than Sh11 billion in the last two years.
Hatched plan
The Last mile project is not the only shock the government may have caused […]
