[kictanet] KENYA POWER TO 'EXIT' RURAL ELECTRIFICATION MARKET - A CASE OF THE TAIL WAGING THE DOG?

Mon Aug 19 07:24:30 EAT 2013

Hi
 Just a thought, how has the stakeholders to supply power to rural areas diversified there resources so that they do not have to rely so much on govern,ent subsidies and offers. Example if they have to supply power to rural areas then they may utilise renewable energy sourcex sucj as wind eneryg solar like what is in turkana. The organisations can help rural folks to install solar energy and that way the only cost will be purchase of equipment and installation. That way they do mot have to deal with below breakeven costs that is recurrent every month and every year.
They can also run renewable energy awareness programs in the villages.
Btw most rural areas are sunlight intensive.

Regards

Meshack

------------------------------
On Fri, Aug 16, 2013 12:04 AM PDT Mark Mwangi wrote:

>I was not aware that Kenya power is nolonger a monopoly. I apologize for my
>ignorance. we cannot however ignore the fact that thy single handedly have
>the widest distribution infrastructure as we speak. KETRACO only has
>control of the new power lines. I assume that Nairobi is only covered by
>Kenya power?
>
>Even AT&T in its hey day was forced by the government to give service to
>unprofitable outposts in the middle of nowhere in the principle that nobody
>is left behind. I understand that most of the fees collected by KPLC are
>for other organisations but the domination in power distribution remains
>and thus the attendant visibility and blame.
>
>I wonder how counties will handle this. Will Kenya power be split into
>local county power companies or will it remain a monolith? I bet some
>counties will want to monopolize their dams etc.
>
>
>On Thu, Aug 15, 2013 at 6:37 PM, Ali Hussein <ali at hussein.me.ke> wrote:
>
>> James
>>
>> I appreciate your contribution to this issue. And I suspect that there are
>> many invisible barriers to entry that may need to be removed to ensure a
>> credible competitor(s) to KP emerge. This is the only way to enthuse energy
>> (pun intended) into the sector.
>>
>> The issue of the counties is a critical component in the energy equation
>> and I hope that we will have enough of them who are forward thinking to
>> encourage investment in the sector.
>>
>> Lastly James I cringe when I hear you talk about government institutions
>> becoming a roadblock to progress. I'm not a legal specialist but doesn't
>> the Government have the powers to call up Eminent Domain statutes to,move
>> things for infrastructural investment?
>>
>> Regards
>>
>> Ali Hussein
>> CEO | 3mice interactive media Ltd
>> Principal | Telemedia Africa Ltd
>>
>> +254 713 601113/ 0770 906375
>>
>> "The future belongs to him who knows how to wait." - Russian Proverb
>>
>> Sent from my iPad
>>
>> On Aug 15, 2013, at 5:06 PM, Barrack Otieno <otieno.barrack at gmail.com>
>> wrote:
>>
>> It is the little foxes like this that will turn Vision 2030 to vision
>> 3020. We will can only achieve prosperity when there is equity across the
>> country in terms of in terms of Infrastructure and connectivity.
>>
>> Best Regards
>>
>>
>>
>>
>> On Thu, Aug 15, 2013 at 4:10 PM, James Mbugua <jgmbugua at gmail.com> wrote:
>>
>> Dennis
>>
>> One of the things KPLC is looking at is partnering with those counties
>> that are ready and proactive; that will provide land for substations and
>> wayleaves, the company will partner with them to rapidly scale up expansion
>> of connections in these counties.
>>
>> This is important if you consider that one of the reasons Nairobi's power
>> has issues is because a 400KV (High Voltage) line running from Mombasa to
>> Nairobi has stalled just outside Nairobi as the likes of KWS refuse to give
>> way leaves citing bird migration.
>>
>> As a result, power from Kipevu III has to be rerouted through Kindaruma
>> first and then to Nairobi and this over a lower capacity line meaning more
>> power losses.
>>
>> The line from Ethiopia to Suswa to bring in 400MW is already running into
>> issues as some ranchers in Laikipia don't want to give wayleaves.
>>
>> The power sector is beset by many challenges and cooperation from
>> Counties to facilitate faster completion of projects would result in
>> overall better access to energy for all.
>>
>> James
>>
>>
>> On Thu, Aug 15, 2013 at 3:56 PM, Dennis Kioko <dmbuvi at gmail.com> wrote:
>>
>>> Great opportunity for Machakos, Kiambu, Muranga counties to partner on
>>> distributing power to rural households in these counties. The same can be
>>> done by other counties.
>>>
>>>
>>> On Thursday, 15 August 2013, Mark Mwangi wrote:
>>>
>>> And why not invest the profits?
>>>
>>>
>>> On Thu, Aug 15, 2013 at 2:52 PM, James Mbugua <jgmbugua at gmail.com>wrote:
>>>
>>>> Ali
>>>>
>>>> Let me weigh in as I represent Kenya Power in Investor Relations.
>>>>
>>>>  I was present at the press conference yesterday and suffice it to
>>>> say, Business Daily and Daily Nation grossly misreported the situation.
>>>> Read the Standard and People they seemed to have gotten it.
>>>>
>>>> There are a few things to appreciate about Kenya Power.
>>>>
>>>> 1. Following the multi-sector working group from across the energy
>>>> sector, petroleum industry players and World Bank that was convened in
>>>> 2001, its recommendations on the energy policy were subsequently issued as
>>>> Sessional Paper No 4. on Energy of 2004.
>>>>
>>>> 2. Out of this, The Energy Act of 2006 was enacted that brought into
>>>> force among other things, the Energy Regulatory Commission, the Geothermal
>>>> Development Corporation, the Kenya Electricity Transmission Company Ketraco
>>>> and the Rural Electrification Authority.
>>>>
>>>> 3. To shield consumers from the high capital expenditure of rural
>>>> expansion, the government formed REA to absorb that cost and leave Kenya
>>>> Power to distribute power.
>>>>
>>>> 4. The Energy Act of 2006 also ended Kenya Power's monopoly on
>>>> distribution. So as at now, KPLC is not a monopoly. In fact, the Energy
>>>> Regulatory Commission would license anyone who demonstrates both the
>>>> technical and financial capacity to be a distributor. All, they have to do
>>>> is to sign a power purchase agreement with an Independent Power Producer
>>>> and then negotiate a wheel-in charge for transmission to use either Kenya
>>>> Power's or Ketraco's lines or if they can, put up their own lines, and then
>>>> organize their billing and collections at the other end.
>>>>
>>>> 5. Rural Electrification is done by REA which has been connecting
>>>> centres, hospitals, schools, markets etc while KPLC comes in to metre and
>>>> switch on consumers.
>>>>
>>>> 6. Rural Electricity has always been subsidized by urban consumers.
>>>> For anything less than 50KWh, they are charged Sh2/Kwh while the average
>>>> cost of a Kwh will come to about Sh4. Nairobi/Urban residents typically pay
>>>> around Sh8/Kwh.
>>>>
>>>> 7. Since 2006, the Kenya Government has not subsidized power at
>>>> generation like it used to. Kenya Power purchases the power at cost and has
>>>> to subsequently evacuate, transmit and distribute this power at an
>>>> additional cost.
>>>>
>>>> 8. Since 2002 despite the rise in cost of materials from poles, to
>>>> cables and transformers, KPLC has not increased the price of connecting
>>>> customers until it decided to review that earlier this year.
>>>>
>>>> 9. In the year 2012 alone, Kenya Power added 307,000 new connections
>>>> at a charge it believes is lower than the actual cost of connecting the
>>>> consumer.
>>>>
>>>> 10. Because of the ever expanding network, and you will see from
>>>> financial reports that the firm books ever bigger figures for depreciation,
>>>> and newer power purchase agreements, it has become necessary for KPLC to
>>>> spend more money on maintenance e.g. After connection, it is the company
>>>> that repairs vandalized wires, transformers etc.
>>>>
>>>> 11. Despite this, the government has (a) Not subsidized power which is
>>>> being supplied to an ever larger number at lower than cost (b) The
>>>> government does not provide guarantees for organizations which are not
>>>> wholly government-owned to access loans or bonds. (c) Between 1991-2007
>>>> there was very little investment in the grid as donors had frozen aid; only
>>>> until the Energy REcovery Strategy Program and the Kenya Electricity
>>>> Expansion Program have we seen significant investment to expand and
>>>> strengthen the grid.
>>>>
>>>> 12. Bear in mind that while constrained as to what it can charge
>>>> consumers, selling power in some cases at below cost, KPLC is expected to
>>>> source funding for investment either from its squeezed margins or from
>>>> financiers without government guarantees while purchasing power at cost and
>>>> taking responsibility for vandalism.
>>>>
>>>> 13. At the end of all this, it has to make its case to shareholders as
>>>> to what kind of returns they should expect.
>>>>
>>>>
>>>> James
>>>>